Afrasia Special Opportunities Fund (Pty) Ltd v Royal Anthem Investments 130 (Pty) Ltd (18299/13, 12562/15) [2016] ZAWCHC 90; [2016] 4 All SA 16 (WCC) (28 July 2016)

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[2016] ZAWCHC 90
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Afrasia Special Opportunities Fund (Pty) Ltd v Royal Anthem Investments 130 (Pty) Ltd (18299/13, 12562/15) [2016] ZAWCHC 90; [2016] 4 All SA 16 (WCC) (28 July 2016)

REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
(WESTERN
CAPE DIVISION, CAPE TOWN)
Case
numbers: 18299/13
and
12562/15
In
the matters between:
AFRASIA
SPECIAL OPPORTUNITIES FUND (PTY)
LTD
...............................................
Applicant
And
ROYAL
ANTHEM INVESTMENTS 130 (PTY)
LTD
.............................................
Sixth
Respondent
JUDGMENT
BINNS-WARD
J:
Before:
The Hon. Mr Justice Binns-Ward
Hearing:
23 March and 5 May 2016
Judgment
delivered: 28 July 2016
[1]
AfrAsia Special Opportunities Fund (Pty)
Ltd (‘AfrAsia’) proceeded on motion in case no.
18299/2013 against seven respondents
for payment of the sum of
R17,889,191 (made up of a principal debt of R16,474,780 plus a
raising fee and interest).  The debt
was alleged to have arisen
from a loan by AfrAsia to Craigan (Pty) Ltd (‘Craigan’).
Default judgment was granted
against all of the respondents on
21 January 2014.  The sixth respondent, Royal Anthem
Investments 130 (Pty) Ltd (‘Royal
Anthem’), subsequently
obtained an order rescinding that judgment.  This judgment is
concerned only with the claim that
was thereafter pursued against
Royal Anthem.
[2]
The alleged basis for Royal Anthem’s
liability in respect of the debt incurred by Craigan was a ‘limited
guarantee’
apparently executed by it in favour of AfrAsia,
whereby it guaranteed the performance by Craigan of the latter’s
obligations
to AfrAsia in terms of the loan agreement and bound
itself to provide security for the performance of its obligation by
hypothecating
two immovable properties in favour of AfrAsia.
The mortgage bonds concerned were registered in the deeds registry as
so-called
‘surety bonds’.
[3]
Royal
Anthem raised a number of defences to the claim against it in case
no. 18299/2013. It also counter-applied for a declaration
that
the mortgage bonds are null and void.
[1]
In response to the counter-application, AfrAsia applied in separate
proceedings, in case no. 12562/2015, for the rectification
of the
mortgage bonds.   Both cases were heard together.  The
nature of the rectification sought is the replacement
in each of the
mortgage bonds of the name of the principal debtor therein identified
as Scarab Investment Holdings (Pty) Ltd with
that of Craigan and the
substitution of the expression ‘Deed of Suretyship’
therein with ‘Limited Guarantee’.
The
rectification application (case no. 12562/2015) and the
counter-application in case no. 18299/2013
[4]
It
is convenient to treat first of the application for the rectification
of the mortgage bonds because in the first of the three
sets of
answering affidavits eventually delivered by Royal Anthem the
approach was adopted that it was not necessary to engage
with the
other defences, including one premised on a lack of authority by the
person purporting to represent the company, by reason
of the fact
that the claim was inconsistent with the cause of debt reflected in
the bonds. As will be explained presently,
[2]
the wording of the bonds is also a crucial consideration in this
matter affecting AfrAsia’s ability to enforce the limited

guarantee agreement.  Obviously, the discussion on this aspect
will proceed on the basis of a prima facie acceptance of the
validity
of the limited guarantee agreement.
[5]
The rectification application was initially
framed as one purportedly made in terms of
s 4
of the
Deeds
Registries Act 47 of 1937
.  That provision invests the
registrars of deeds with the power to rectify errors in deeds or
documents in the name or the
description of any person or property
mentioned therein, or in the conditions affecting any such property
if the registrar considers
it necessary or desirable to do so.
The registrar must obtain the written consent of every party who
might have an interest
in the rectification, and, in the event of any
such person refusing to provide consent, may apply to court for
authority to effect
the rectification.  It is plain therefore
that an application for rectification in terms of
s 4
would be
brought only by the registrar, and only in circumstances in which
the
registrar
considered it necessary to
amend a deed or document.
[6]
The rectification sought by AfrAsia in the
current matter moreover does not concern the misdescription of a name
or property, which
is something of a merely clerical character.
It goes rather to a correction of the recordal of the obligations to
which the
acts of hypothecation related and the identity of the
parties to the underlying contract.
[7]
Section
4
of the
Deeds Registries Act is
therefore not applicable to an
application for rectification of the nature currently under
consideration.  AfrAsia advisedly
excised the reference to the
provision in its amended notice of motion.
[3]
[8]
The
object of registration in the context currently in issue is to
provide a public record of real rights in immovable property.
The
mortgage bonds record the hypothecation of the properties in question
in favour of a particular creditor.
[4]
Their registration constitutes the act that gives effect to the
hypothecation by vesting the real rights in the mortgagee
that
constitute its security.  There is, strictly speaking, no need
for the nature of the underlying obligation to be recorded
in the
bond, but it is customarily done.
[5]
Thus, provided that there is in fact an underlying obligation, a
mistake in its recordal does not defeat the effectiveness
of the
hypothecation.  Where, as in the current case, the mortgage
bonds do record the terms of the underlying obligationary
contract,
the bonds are, just like any written agreement, susceptible to
rectification to correct any error and to record the true
position.
[9]
In
the peculiar circumstances of the current case rectification of the
mortgage bonds is, exceptionally, a necessary prerequisite
to
AfrAsia’s ability to pursue its principal claim against Royal
Anthem.  This is because an express provision in the
limited
guarantee agreement entered into by Royal Anthem defines the extent
of its obligations to AfrAsia as being ‘limited
to the exercise
of [AfrAsia’s] rights
in
terms of the Mortgage Bond
’.
Discordance between the terms of the mortgage bonds and the character
of AfrAsia’s claim in terms of the limited
guarantee agreement
would in these circumstances obviously be problematic.
[6]
[10]
The term ‘
Mortgage
Bond
’ was defined in the limited
guarantee agreement to mean the mortgage bond(s) to be registered by
Royal Anthem in favour of
AfrAsia over certain of Royal Anthem’s
immovable property for a maximum capital sum of R22 million as
security for Craigan’s
obligations in terms of the loan
agreement between AfrAsia and Craigan that was entered into in
circumstances to be touched on
presently.
[11]
It is not necessary to engage with the
evidence in detail at this stage.  Suffice it to say that at the
material time Craigan
and Royal Anthem were represented by one Stuart
Paget in their dealings with AfrAsia.   Paget also
controlled Scarab
Investment Holdings (Pty) Ltd.  These three
companies, along with three others, which were also respondents in
case no. 18299/2013,
constituted a group of companies; apparently
called the ‘Scarab Group’.  The essential purpose of
the relevant
transactions was to obtain working capital for a cement
business.  (Craigan’s trading name was Trojan Cement.)

Paget involved a multiplicity of companies in the transactions for
the purpose of providing the security that AfrAsia required
in
respect of the loan that it was, in principle, willing to advance.
In regard to the latter aspect, part of the funds to
be advanced to
the group was to be used to settle Royal Anthem’s then existing
mortgage debt to a third party, Chesterfin.
This was necessary
if AfrAsia were to be afforded the contemplated security in respect
of the repayment of the loan by means of
a first mortgage over
certain immovable property owned by Royal Anthem.
[12]
It is evident from an email, dated 19 June
2013, from one Paul Dixon (variously described in the papers as
Paget’s spokesperson
and intermediary or the ‘introducer’
of the transactions) to one Peter John Van Zyl, representing AfrAsia,
that it
had been requested that the loan be advanced to Craigan,
rather than any other company in the group.  It was represented
that
that was in order to produce a tax advantage.  It was
contemplated that various fixed properties owned by separate
property-owning
companies would be provided as security for the
repayment of the loan.  The documentation subsequently executed
for the purpose
of the implementation of the contemplated transaction
included an agreement of loan in terms of which Craigan was
identified as
‘the borrower’ and AfrAsia as ‘the
lender’.  Royal Anthem was a party to that agreement.
Its
role as party to the loan agreement was as a ‘property
owner’, as defined in the agreement.  The agreement
provided
that the property owners would ‘enter into the Limited
Guarantees, Mortgage Bond Powers of Attorney and Mortgage Bonds’

to furnish security for the satisfaction of the borrower’s
obligations to the lender.
[13]
Royal Anthem, purportedly represented by
Paget, executed a deed of ‘limited guarantee’ in favour
of AfrAsia on 29 July
2013 – the same day as the company
subscribed as a party to the aforementioned loan agreement between
Craigan and AfrAsia.
According to its tenor, the limited
guarantee agreement bound Royal Anthem in favour of AfrAsia in
respect of the performance
by Craigan of its obligations to AfrAsia
under the loan agreement - to which it was expressly
cross-referenced.  As mentioned,
the limited guarantee agreement
limited the extent of Royal Anthem’s liability thereunder to
its obligations as recorded
in the mortgage bonds that were to be
registered against its properties.
[14]
AfrAsia was provided with a document that
purported to be a resolution by the board of Royal Anthem, dated 29
July 2013, authorising
the company to become party to the
transactions and to register ‘a mortgage bond over certain
immovable assets of the Company’
in favour of AfrAsia.  It
is plain from the context of the resolution that the contemplated
mortgage of the company’s
property was intended to serve as
security for its performance in terms of the ‘limited guarantee
agreement’ with AfrAsia
that was also authorised by the
directors’ resolution.
[15]
The aforementioned resolution by the board
of Royal Anthem appeared to bear the signatures, qua directors, of
Paget and one Harold
Murray Muller.  Paget had acquired the
shares in Royal Anthem from Muller through the vehicle of another
company, Market Demand
Trading 620 (Pty) Ltd, for R25,5 million,
payable by way of a deposit of R1,5 million and 48 monthly
instalments of R500 000.
The shares acquired by Market
Demand Trading in Royal Anthem had, however, been pledged back to
Muller pending settlement of the
outstanding purchase consideration.
Muller had also remained a member of Royal Anthem’s board
pending full payment
for the shares.  (Market Demand Trading was
in default in respect of payment of the monthly instalments in July
2013.)
Muller avers that what purports to be his signature on
the resolution is a forgery.  I shall come back to address the
effect
of Muller’s averment when I deal later with the validity
or effectiveness of the transactions.
[16]
The uncontroverted evidence is that the
mortgage bonds subsequently registered against two immovable
properties of Royal Anthem
- Erf 2742 Franschhoek and portion 3 (a
portion of Portion 1) of the Farm Klein Deel 668 - were
executed and registered
in performance of the obligations of Royal
Anthem recorded in terms of the aforementioned loan and limited
guarantee agreements.
[17]
As mentioned, the mortgage bonds reflect
the name of the principal debtor as Scarab Investment Holdings (Pty)
Ltd, not Craigan.
That this was erroneous is evident from the
context, described above, in which the mortgage bonds were
registered.  There
is nothing to suggest that AfrAsia had
advanced, or ever intended to advance, a loan to Scarab Investment
Holdings.  All the
other documentation executed by the parties
supports the fact that it had been the common understanding that
Craigan, not Scarab
Investment Holdings, should be identified in the
mortgage bonds as the principal debtor, consistently with the loan
agreement.
[18]
The
bonds also reflect that Royal Anthem is bound in favour of AfrAsia as
surety for the principal debtor in respect of the latter’s

obligations to AfrAsia in terms of a loan in the amount of
R22 million.  The mortgage bonds record that the obligation

as surety was undertaken because AfrAsia had required ‘additional
security for the said loan’ and that Royal Anthem
had agreed to
provide such additional security, which it had ‘done by way of
a Deed of Suretyship in favour of’ AfrAsia.
There was no
evidence, however, to support the notion that Royal Anthem had
executed a deed of suretyship, or that it had ever
been intended that
it should do so.  As described above, the loan agreement obliged
Royal Anthem instead to enter into a ‘limited
guarantee’
agreement and to mortgage its properties in favour of AfrAsia as
security.  Indeed, the primary deponent
to Royal Anthem’s
answering papers in the principal proceedings (Muller) admitted ‘that
the limited guarantee is the
only possible
causa
’
for the mortgage bonds.
[7]
[19]
It
was argued on behalf of Royal Anthem that merely correcting the
description of the principal debtor in the mortgage bonds, as

originally sought by AfrAsia in its rectification application, would
not render the mortgages effective because there was in point
of fact
no deed of suretyship in existence.  It was this argument that
prompted AfrAsia to apply to amend the relief it sought
to include a
substitution of the expression ‘Deed of Suretyship’ in
the mortgage bonds with ‘limited guarantee
agreement’.
In my view a rectification on this basis would be unexceptionable in
the factual context described above.
But, strictly speaking, it
would be unnecessary.  Evidence
dehors
the bonds to identify the ‘deed of suretyship’ would not
offend against the parol evidence rule.  I consider that
it is
quite obvious on the incontestable facts that were Paget to have been
asked to identify the ‘Deed of Suretyship’
when he
executed the power of attorney to authorise the registration of the
mortgage bonds, he would have pointed out the limited
guarantee
agreement.  Whether a so-called guarantee that consists of an
undertaking to pay a debt owed by another in the event
of the debtor
failing to do so is anything other than a contract of suretyship is a
matter of legal technicality, and apparently
unresolved academic
debate.
[8]
The guarantee
agreement entered into by Royal Anthem being only arguably
distinguishable from a suretyship, it is hardly
surprising that
neither Paget, nor the registering attorneys were astute to the
difference - if difference there was.
[20]
It was also argued that a rectification of
the mortgage bond to replace the expression ‘Deed of
Suretyship’ with ‘limited
guarantee agreement’
would require a fundamental re-characterisation of the mortgage
bonds.  As mentioned, the bonds
are labelled as ‘Surety
Bonds’.  It was submitted that the rectification sought by
the applicant would entail
changing the character of the mortgage
bonds into ‘covering bonds’.  The argument is a red
herring in my view.
The label is irrelevant.
Rectification would not detract from the efficacy of the registration
of the mortgage bonds as acts
of hypothecation vesting real rights in
Royal Anthem’s immovable properties in AfrAsia.  The
causa
for the hypothecation is AfrAsia’s rights against Royal Anthem
in terms of the limited guarantee agreement.
[21]
The absence of a deed of suretyship in the
form of a contractual document professing itself to be such was the
only ground upon
which Royal Anthem’s aforementioned
counter-application was based.  For the reasons just given, that
ground cannot be
upheld.  (The position remains, however, that
if there is no valid underlying
causa
for the mortgages, Royal Anthem would be entitled to obtain their
cancellation for ‘[t]he settlement of a security divorced
from
an obligation which it secures [is] meaningless’; cf.
Kilburn
v Estate Kilburn
1931 AD 501
, at 505
fin – 506.)
[22]
It was further argued on Royal Anthem’s
behalf that a rectification of the mortgage bonds as sought by
AfrAsia would afford
the latter a cause of action that had not
existed when proceedings had been instituted under case no.
18299/2013 in respect of
the principal claim.  It was not made
altogether clear whether the argument was advanced in opposition to
the application
for the rectification of the mortgage bonds, or to
the applicant’s claim to execution against the properties in
the principal
case.  In either context, there is no merit in
it.  Firstly, as explained above, the recordal of the underlying
obligation
upon which the hypothecation of immovable property is
premised is not a legal requirement for the validity or efficacy of
the hypothecation.
Secondly, and in any event, rectification is
directed at achieving a declaration of the wording of a jural
document as it was originally
intended to be, and initially should
have been; cf.
Boundary Financing
Ltd v Protea Property Holdings (Pty) Ltd
2009 (3) SA 447
(SCA), at para 13.  It therefore operates
ex tunc
;
not
ex nunc
.
It is to be distinguished from an amendment, which is something that
changes the content of a document.
[23]
In any event, I think it should be borne in
mind that the ‘rectification’ of the mortgage bonds is in
the nature of
a correction of the deeds to accurately reflect the
causa
of
the hypothecation.  The acts of hypothecation were in fulfilment
of the underlying agreements that AfrAsia seeks to enforce,
which are
not in need of rectification.  The Full Court judgment in this
Division in
Taylor v Cape Importers
1938
CPD 362
appears to afford authority for the proposition that a party
is entitled to rectification of a mortgage bond to accord with the

underlying agreement in terms of which it came to be registered, even
if the bond had been registered in terms of a power of attorney
that
had misstated the
causa
.
The effect is to make the bond read as it always should have read.
In
Cape Importers
,
the court refused to grant provisional sentence on a mortgage bond in
circumstances in which the terms of the bond conflicted
with those of
the underlying agreement, notwithstanding that the bond had been
executed consistently with a power of attorney signed
by a party in
the mistaken belief that it did faithfully record the cause for the
hypothecation; see also
Grobler v
Scholtz
1953 (3) SA 175
(T) and
compare
Tesven CC and Another v South African Bank of Athens
2000 (1)
SA 268
(SCA),
[1999] 4 All SA 396
, especially at para 16.
[24]
There is nothing in the evidence to suggest
that the rectification of the registered mortgage bonds would
prejudice the position
of any third party; cf.
Durmalingam
v Bruce
1964 (1) SA 807
(D), at 811
fin
-812.
[25]
There would be no point in acceding to the
application to rectify the bonds, however, if the validity of the
underlying
causa
is not established.  It is to that question that I turn next.
The validity
of the contracts
[26]
Royal Anthem has resisted liability in
terms of the limited guarantee agreement on a number of grounds.
[27]
Firstly, and most fundamentally it seems to
me - although one might be forgiven for thinking otherwise having
regard to the manner
in which the point was almost buried under a
plethora of other rather technical defences in Royal Anthem’s
papers - it was
contended that Paget had not been authorised to
represent it in concluding the agreement and that consequently it was
not bound
thereby.
Paget’s
authority to represent Royal Anthem
[28]
The
relevant factual context in this regard may be accepted to have been
the following:  When Market Demand Trading acquired
the entire
shareholding in Royal Anthem from Muller, the shares and attendant
rights therein were pledged and ceded to Muller pending
payment of
the full purchase price.  There is no evidence to suggest that
anyone representing AfrAsia in entering into the
relevant
transactions was, or reasonably should have been, aware of the
cession and pledge arrangement.  Paget was appointed
to the
board of Royal Anthem, but Muller remained a director.  As
mentioned earlier, the idea was that Muller would remain
on the board
until he had been paid in full for his shares.  Insofar as Royal
Anthem, as a land holding company, required
executive management,
Paget took over that function from Muller.  He exercised
hands-on control over the company’s properties.
Paget was
apparently thought by AfrAsia to be Royal Anthem’s managing
director.  But there is no evidence that he had
been appointed
as such, or that the company expressly represented him to be the
managing director.  An allegation by AfrAsia
on the pleadings in
case no. 7520/2014
[9]
that
Paget was Royal Anthem’s managing director was not denied, but
I do not consider that suffices as evidence in the matters
before me
that he was.  It is generally accepted, however, that a person
permitted by a company to conduct himself as its
de
facto
managing director may be regarded by outsiders as if he had been
formally appointed as such; cf.
Freeman
& Lockyer (A Firm) v Buckhurst Park Properties (Mangal) Ltd. and
Another
[1964] 2 Q.B. 480
, at 509 (per Diplock LJ), following
Biggerstaff
v Rowatt’s Wharf Ltd.
[1896] 2 Ch. 93
and
British
Thomson-Houston Co. v Federated European Bank Ltd.
[1932] 2 K.B. 176
; see also
Legg
& Co v Premier Tobacco Co
1926 AD 132
at 139,
Wolpert
v Uitzigt Properties (Pty) Ltd and Others
1961 (2) SA 257
(W) at 265H-266B and
One
Stop Financial Services (Pty) Ltd v Neffensaan Ontwikkelings (Pty)
Ltd and Another
2015 (4) SA 623
(WCC), at para 26.
[29]
The conclusion of the limited guarantee
agreement constituted the provision by Royal Anthem of ‘financial
assistance’
to a related company in the sense contemplated by
s 45 of the Companies Act 71 of 2008 (‘the
Companies
Act&rsquo
;).  Accordingly, the company could not properly enter
into the agreement without complying with the requirements prescribed

in
s 45(3)
and (4).  These requirements included a special
resolution of the shareholders, adopted within the previous two
years, which
approved such assistance, and the board having satisfied
itself that the transaction would not imperil the company’s
solvency
and liquidity and also that the assistance was to be
furnished on terms that would be fair and reasonable to the company.

By virtue of certain provisions in the aforementioned cession and
pledge agreement, Market Demand Trading, qua sole shareholder
of
Royal Anthem, was not able to competently approve the transaction
without Muller’s consent.  Muller denies having
had any
knowledge that the transaction was proposed and says he was never
approached to give his consent.
[30]
Paget
provided AfrAsia with documentation that purported to show due
compliance by Royal Anthem with the requirements of
s 45
of the
Companies Act and
authorising the conclusion of the limited guarantee
agreement.  The documentation purported to be a relevant
resolution apparently
signed by both of the directors of the company
and a resolution by Market Demand Trading, signed by Paget, approving
the transaction
in its capacity as the sole shareholder in Royal
Anthem.  For the purpose of the determination of AfrAsia’s
claim in
the principal case it may be accepted that what purported to
be Muller’s signature on the board resolution was a
forgery.
[10]
There is,
however, nothing in the evidence to suggest that any of AfrAsia’s
representatives should have appreciated
or suspected as much before
Muller made the allegation in the course of the litigation.
[31]
AfrAsia
contends that in the circumstances just described its position is
protected by the rule in Turquand’s case
[11]
and/or
the provisions of s 20(7) and (8) of the 2008
Companies Act,
which
provide -
(7)
A person dealing with a company in good faith, other than a director,
prescribed officer or shareholder of the company, is entitled
to
presume that the company, in making any decision in the exercise of
its powers, has complied with all of the formal and procedural

requirements in terms of this Act, its Memorandum of Incorporation
and any rules of the company unless, in the circumstances, the
person
knew or reasonably ought to have known of any failure by the company
to comply with any such requirement.
(8)
Subsection (7) must be construed concurrently with, and not in
substitution for, any relevant common law principle relating
to the
presumed validity of the actions of a company in the exercise of its
powers.
[32]
The
expression ‘the rule in Turquand’s case’ is often
used loosely to cover a wide field, including matters that
are
relevant to the establishment of the ostensible authority of persons
contracting on behalf of companies,
[12]
but the effect of the Turquand rule in its true and narrower sense is
limited.  It provides no more than that an outsider
treating
with a company is entitled to assume, in the absence of good reason
to suspect otherwise, that any internal rule of management
to which
the company’s representative’s authority to act on its
behalf in the transaction in issue is subject has been
complied
with.  The incorporation of the rule as part of our common law
was confirmed in
The
Mine Workers' Union v JJ Prinsloo; The Mine Workers' Union v JP
Prinsloo; The Mine Workers' Union v Greyling
1948 (3) SA 831
(A).  The history and ambit of the operation of
the rule has been described in a number of judgments of the South
African
courts, the more illuminating of which include
Wolpert
v Uitzigt Properties (Pty) Ltd and Others
supra,
Tuckers
Land and Development Corporation (Pty) Ltd v Perpellief
1978 (2) SA 11
(T) and
One
Stop Financial Services (Pty) Ltd v Neffensaan Ontwikkelings (Pty)
Ltd and Another
supra.  It would be superfluous for me to repeat here what has
been comprehensively traversed in those authorities.
Suffice it
to say that it is clear that the rule is of no assistance to a party
seeking to enforce a transaction with a company
who is not able to
prove that the person with whom it transacted as the company’s
representative was authorised to represent
the company (cf.
Nieuwoudt
NO and another v Vrystaat Mielies (Edms) Bpk
2004 (3) SA 486
(SCA), at para 22).  The character of the
authority might be express, implied, or ostensible (sometimes also
referred to as
‘apparent’).
[33]
Ostensible authority – a concept that
generally arises for consideration only when, as in the current case,
a principal disputes
the authority of its agent to have represented
it - is established when a company (or indeed any principal), by its
conduct, leads
third parties reasonably to believe that the person
purporting to represent it is in fact authorised to do so.  Such
conduct
results in the company being estopped from denying that the
person lacked authority.  So, in
NBS
Bank Ltd v Cape Produce Co (Pty) Ltd and Others
2002 (1) SA 396
(SCA), at para 26, it was held that the requirements
for holding a principal liable on the basis of the ostensible
authority of
its acknowledged agent are:
1.
A representation by words or conduct.
2.
Made by [the principal] and not merely by [the agent], that he had
the authority to act as he did.
3.
A representation in a form such that [the principal] should
reasonably have expected that outsiders would act on the strength
of
it.
4.
Reliance by [the third party] on the representation.
5.
The reasonableness of such reliance.
6.
Consequent prejudice to [the third party]
[34]
The fundamental issue between the parties
in the current case is whether Paget’s conduct resulted in
Royal Anthem being bound
by the pertinent agreements and the
consequent hypothecation of its immovable property.  The
company, represented by Muller,
who, after the cancellation of the
sale of shares agreement with Market Demand Trading, is now once
again its sole director and
shareholder, alleges that it is not
because Paget lacked authority and the directors’ resolution
upon which he purported
to act was a forgery.  Rules of internal
management are not germane to the question that is in dispute.
AfrAsia’s
invocation of the Turquand rule does not meet
the allegation that Paget fraudulently misrepresented that Royal
Anthem’s directors
had resolved to approve the transactions.
[35]
It
might be that
s 20(7)
of the
Companies Act could
afford AfrAsia
an effective answer to some or all of the defences that Royal Anthem
has sought raise based on alleged non-compliance
with certain
provisions of the Act.
[13]
But one only has to engage with that proposition if it is established
that Paget was indeed actually, impliedly, or ostensibly
authorised
to represent Royal Anthem in concluding the transactions, or perhaps
that the company had given out that he was authorised
to represent to
outsiders that the relevant organs of the company that did have
authority to commit it to the transactions had
given the requisite go
ahead.
[36]
In the face of the evidence of Muller that
AfrAsia has been unable to refute on the papers, it has to be
accepted that Paget did
not have actual authority from the board to
represent the company.  In the context of its shares in Royal
Anthem having been
pledged to Muller in terms of an agreement that
limited the pledgor’s rights to use the shares without Muller’s
consent,
I also do not consider that any reliance can be placed on
the resolution by Market Demand Trading, qua shareholder, as having
effectively
vested Paget with actual authority to bind the company.
[37]
Had
it been established that Paget had been appointed as managing
director of Royal Anthem, that might have afforded an effective
basis
to contend that he had implied authority to represent the company
(cf. e.g.
Wolpert
supra, at 262E-H, citing
Robinson
v Randfontein Estates Gold Mining Co. Ltd.
,
1921 AD 168
at pp. 216 - 7
,
[14]
and
One
Stop
Financial
Services
supra,
at para 26); but I have already found that it was not.  I am
willing to accept, however, that AfrAsia was entitled to
treat with
Paget as the
de
facto
managing director of Royal Anthem.  His implied authority to
represent the company in that capacity would, however, have been

limited to dealings that would fall within the authority usually
vested in a managing director.  That would cover concluding

contracts within the ordinary scope of the company’s day-to-day
business.
[15]
In my view
binding the company as guarantor of a third party’s debt
repayment and giving a substantial part of the
company’s assets
as security for that obligation did not fall within the ordinary
scope of Royal Anthem’s ordinary
business, as far as it may be
discerned on the papers.  These were not what might be termed
‘normal’ contracts.
[38]
In arguing in support of a finding that
Paget had ostensible authority to represent Royal Anthem, AfrAsia’s
counsel pointed
out that Muller had placed Paget or Market Demand
Trading in possession of the immovable properties owned by Royal
Anthem and had
handed over the original title deeds for the
properties.  Muller had also agreed, when Market Demand Trading
had fallen into
default in its payments for the shares in Royal
Anthem, that a mortgage loan might be raised by the company to put
Market Demand
Trading in funds to settle the outstanding balance on
the purchase price of the shares and that Paget should attend to the
necessary
arrangements.  They argued that against that
background it was apparent that had AfrAsia or any of its
representatives approached
Muller for approval for the registration
of the mortgage bonds in respect of Royal Anthem’s properties,
he would have furnished
it.  I do not find that argument
helpful.  It postulates a hypothetical context and invites a
speculative answer.
Muller would no doubt have been agreeable
to giving approval for the registration of a mortgage bond to secure
a loan to be obtained
to achieve payment of the amount due to him.
There is nothing, however, to suggest that he would have agreed to
the bonding
of the properties for the purpose of securing a loan to a
business in the Scarab Group.  In the context of Market Demand
Trading’s
default on its monthly payments for its shares in
Royal Anthem, the probabilities are actually to the contrary.
[39]
In
point of fact AfrAsia had established that Paget was but one of two
directors of Royal Anthem and had insisted, in the context
of that
discovery, on being provided with both a shareholder’s
resolution and a directors’ resolution signed by both
Muller
and Paget.  This indicates that AfrAsia did not treat with Paget
on the basis of assuming that he had implied authority
to represent
Royal Anthem, but insisted instead on being provided with direct
evidence of express authority by the company for
him to enter into
the transactions.  AfrAsia’s requirement in this regard is
also inconsistent with the notion that
it treated with Paget on the
basis of any conduct by Royal Anthem amounting to a tacit
representation by the company that he had
authority to represent it
in concluding the transactions.  Indeed, in its final set of
replying affidavits, in the passage
in which it contended for Paget’s
ostensible authority,
[16]
AfrAsia did not identify any conduct of
Royal
Anthem
,
rather than of Paget himself, on which it had relied in assuming
Paget’s apparent, as distinct from purportedly actual,

authority to bind Royal Anthem.
[40]
In providing the shareholder’s
resolution, Paget failed to disclose the pledge agreement, which
rendered it ineffectual, and,
as already noted, for present purposes
it has to be accepted that Muller’s signature was a forgery.
If the resolutions
were valid and effectual they would have clothed
Paget with actual authority, and there would consequently be no
occasion for a
debate on his ostensible authority.
[41]
Royal
Anthem’s counsel argued, with reliance on the decision of the
House of Lords in
Ruben
v Great Fingall Consolidated
[1906] AC 439
, ‘that being a forgery, the [directors’]
resolution is a pure nullity and cannot found ostensible authority’.

Subsequent authority illustrates, however, that that proposition is
probably too bluntly stated. The issue of which party should
be
burdened with the consequences of Paget’s fraud could be
affected by whether or not the fraud was perpetrated in the course
of
conduct by Paget acting within the scope of his apparent authority.
In the circumstances of the current case that would
include not only
any apparent authority he might be said to have had to conclude the
agreements on behalf of Royal Anthem, but
also, as I shall discuss
presently, his apparent authority to convey Royal Anthem’s
board’s authorisation of the transactions.
If his actions
were clothed with such authority, then, on the approach adopted in
more recent English judgments such as those in
Lloyd
v Grace Smith & Co
[1912] UKHL 1
,
First
Energy (UK) Ltd v Hungarian International Bank Ltd
[1993] 2 Lloyds Rep 194, [1993] BCLC 1409,
[17]
Lovert
& Anor v Carson Country Homes Ltd & Ors
[2009] EWHC 1143
(Ch),
[2009] 2 BCLC 196
,
[2011] BCC 789
and
Kelly
& Ors v Fraser (Jamaicas)
[2012] UKPC 25
,
[2013] 1 AC 450]
,
[2012] 3 WLR 1008
, Royal
Anthem might have to bear the consequences of the fraud and
consequently be bound by the limited guarantee agreement.
For
South African authority to the same effect see
Chappell
v Gohl
1928 CPD 47
, especially at p. 52;
Price
NO v Allied-JBS Building Society
1979 (2) SA 262
(E), at 268 (referring with approval to, amongst
others,
U
xbridge
Permanent Benefit Building Society v Pickard
[1939] 2 All ER 344
(CA) at 349 – a case which involved fraud
by an agent using a forged document)
and
cf.
National
& Overseas Distributors Corporation (Pty) Ltd v Potato Board
1958 (2) SA 473
(A) - which although premised on mistake, not fraud,
is indistinguishable in principle – and
Hlobo
v Multilateral Motor Vehicle Accidents Fund
2001 (2) SA 59
(SCA), at para 13.
[42]
In
Kelly
& Ors v Fraser
supra,
at para 11 – 15, Lord Sumption eloquently highlighted the
basis for validly distinguishing between ostensible
authority to
conclude a transaction and ostensible authority to represent that
authority had been given for the conclusion of a
transaction, taking
care to explain why this did not amount to a departure from the
judgments in the House of Lords and Court of
Appeal in
Armagas
Ltd v Mundogas SA
,
[18]
which
might easily be misread to have held to the contrary:
11.
The Board [of the Judicial Committee of the Privy Council] approaches
the question whether the trustees [of a pension fund]
were bound by
these statements on the footing that neither Mr Masters [an official
in the employ of the pension fund] or any one
else in the Employee
Benefits Division had authority of any kind to approve the transfer
[of the accrued pension benefits of a
certain Mr Fraser in a
different pension fund] into the Plan. Nor did they purport to have
done so. Equally, none of them had any
actual authority to tell Mr
Fraser that everything was in order if it was not. The question,
therefore, is whether they had ostensible
authority to tell Mr Fraser
that whatever steps needed to be taken to carry out his transaction
regularly had been duly performed,
if they had no authority to
perform those steps themselves.
12.
The question could hardly have arisen in this form but for certain
observations of Goff LJ in the Court of Appeal in
Armagas Ltd v
Mundogas SA (The "Ocean Frost")
[1985] UKHL 11
;
[1986] AC 717
, and of
Lord Keith of Kinkel, delivering the leading speech in the House of
Lords in the same case. The
Ocean Frost
was a decision on
complex and extraordinary facts. Armagas was a vehicle company formed
by two Danish shipowners to buy a ship
from Mundogas, on the basis
that Mundogas would then charter it back from them for three years.
Negotiations for the deal were
conducted between Armagas's broker,
who had been promised a substantial interest in Armagas if the deal
went through, and a Mr
Magelssen, who was a Vice-President and the
chartering manager of Mundogas. The broker bribed Mr Magelssen to
sign a spurious three
year charter, purportedly on behalf of
Mundogas. Mundogas had not authorised Mr Magelssen to do this, and
indeed were unaware that
he done it until much later. For their part,
neither Armagas nor its two principals had any contact with any
representative of
Mundogas other than Mr Magelssen. They knew that Mr
Magelssen had no authority to enter into the charterparty on behalf
of Mundogas
without the specific and express approval of his
superiors, but they believed that he had obtained it because their
own broker
told them so. Armagas sought to hold Mundogas to the
three-year charterparty, on the footing that although Mr Magelssen
had neither
actual nor ostensible authority to enter into it, they
were entitled to rely on his execution of the agreement and his
expression
of Mundogas's satisfaction that it had been concluded as
constituting implied representations that he had obtained express
authority
from the top management of Mundogas. The trial judge had
upheld that submission. He had held that by appointing Mr Magelssen
as
Vice-President and chartering manager, Mundogas had ostensibly
clothed him with authority to make representations about his own

authority to sign such agreements. The Court of Appeal did not agree.
Goff LJ, delivering the leading judgment, considered that
there was
no basis for concluding on the facts of that case that, by appointing
him as Vice-President and chartering manager, Mundogas
had held him
out as having power to make the particular representations relied
upon: see pp 730-732. This was because the only
authority of Mr
Magelssen that would serve Armagas's purposes was authority to enter
into the charterparty, as he had purported
to do. The principals of
Armagas knew that Mr Magelssen was not authorised to do that without
the specific and express authority
of his superiors. He cannot
therefore have had any ostensible authority to do it simply by virtue
of the appointments that he held
in Mundogas. To say that he had
ostensible authority by virtue of those appointments to communicate
that he had express authority
to contract, was only another of saying
he had ostensible authority to contract. Every agent who enters into
a contract thereby
asserts that he has authority, but that alone
cannot be enough to bind his principal. The House of Lords affirmed
the decision
of the Court of Appeal and endorsed Goff LJ's analysis.
Lord Keith, who delivered the sole reasoned speech, declared (p 779)

that he was not willing to accept "the general proposition that
ostensible authority of an agent to communicate agreement
by his
principal to a particular transaction is conceptually different from
ostensible authority to enter into that particular
transaction."
Like Goff LJ, Lord Keith thought that while it was conceptually
possible to have a case of “ostensible
specific authority to
enter into a particular transaction”, such cases were bound to
be rare (p 777). It is clear that the
whole of this analysis is
dependent on the fact that in the
Ocean Frost
the agent was in
reality holding out himself as having authority to do a specific
thing that the third party knew that he had no
general authority to
do. Such cases are necessarily fact-sensitive. The
Ocean Frost
is not authority for the broader proposition that a person without
authority of any kind to enter into a transaction cannot as
a matter
of law occupy a position in which he has ostensible authority to tell
a third party that the proper person has authorised
it.
13.
To take an obvious example, the company secretary does not have the
actual authority which the board of directors has, but he
is likely
to have its ostensible authority by virtue of his functions to
communicate what the board has decided or to authenticate
documents
which record what it has decided. The ordinary authority to
communicate a company's authorisation of a transaction will
generally
be more widely distributed than that, especially in a
bureaucratically complex organisation and in the case of routine

transactions. It is not at all uncommon for the authority to approve
transactions to be limited to a handful of very senior officers,
but
for their approval to be communicated in the ordinary course of the
company's administration by others whose function it is
to do that.
Browne-Wilkinson LJ was referring to situations of that kind when he
said in
Egyptian International Foreign Trade Co) v Soplex
Wholesale Supplies Ltd
[1985] 2 Lloyd's Rep 36, 42-43:
“
It
is obviously correct that an agent who has no actual or apparent
authority either (a) to enter into a transaction or (b)
to make
representations as to the transaction cannot hold himself out as
having authority to enter into the transaction so as to
effect the
principal's position. But, suppose a company confers actual or
apparent authority on X to make representations and X
erroneously
represents to a third party that Y has authority to enter into a
transaction; why should not such a representation
be relied upon as
part of the holding out of Y by the company? By parity of reasoning,
if a company confers actual or apparent
authority on A to make
representations on the company's behalf but no actual authority on A
to enter into the specific transaction,
why should a representation
made by A as to his authority not be capable of being relied on as
one of the acts of holding out?”
14.
In
First Energy (UK) Ltd v Hungarian International Bank Ltd
[1993] 2 Lloyd's Rep 194 the Plaintiff's representative
negotiated a credit agreement with the regional manager of a bank,

who had authority to negotiate the terms but told him that he had no
authority to sanction the final deal, which was a matter for
the
bank's head office. The regional manager eventually wrote a letter
amounting to an offer which was capable of immediate acceptance
and
was in fact accepted by the Plaintiff. The Court of Appeal held that
that was an implicit statement that head office had sanctioned
the
deal, which the regional manager had ostensible authority by virtue
of his position to communicate. There is, as Evans LJ said
in that
case (p 206) “no requirement that the authority to
communicate decisions should be commensurate with the authority
to
enter into a transaction of the kind in question on behalf of the
principal.”
15.
It is clear from the judgments in
First Energy
that the Court
of Appeal regarded their approach in that case as being wholly
consistent with the law stated by Lord Keith in
Armagas v
Mundogas
. In the Board's opinion, they were right to regard them
as consistent. Lord Keith's speech remains the classic statement of
the
relevant legal principles. An agent cannot be said to have
authority
solely
on the basis that he has held himself out as
having it. It is, however, perfectly possible for the proper
authorities of a company
(or, for that matter, any other principal)
to organise its affairs in such a way that subordinates who would not
have authority
to approve a transaction are nevertheless held out by
those authorities as the persons who are to communicate to outsiders
the
fact that it has been approved by those who are authorised to
approve it or that some particular agent has been duly authorised
to
approve it. These are representations which, if made by some one held
out by the company to make representations of that kind,
may give
rise to an estoppel. Every case calls for a careful examination of
its particular facts.
[43]
AfrAsia did not expressly plead an estoppel
predicated on the sort of representation or holding out identified in
Kelly
and
First Energy
supra, but it is clear on the evidence that it was induced by Paget’s
representation that the board and shareholders of Royal
Anthem had
authorised the transactions to act to its prejudice and advance funds
to Craigan.  It was implicit in AfrAsia’s
case, especially
its invocation of s 20(7) of the 2008
Companies Act, that
it was
entitled to rely on Paget’s representation that the board and
shareholders of Royal Anthem had authorised the transactions
to hold
Royal Anthem to the contract.  Whether or not Royal Anthem had
held Paget out as being a person with authority to
convey such
decisions to outsiders on its behalf falls to be determined on the
facts as they appear from the papers.  Ostensible
authority,
even if its particular ambit was not as carefully defined as it might
have been, was squarely raised by AfrAsia –
at least
conceptually - as an answer to Royal Anthem’s allegations
concerning Paget’s lack of authority to bind the
company.
I therefore consider that this court is not precluded from
considering the issue of authority on the basis that
the Privy
Council did in
Kelly
and the Court of Appeal in
First
Energy
.  (Indeed, in
First
Energy
the issue also does not appear
to have been clearly articulated on the pleadings, but the Court of
Appeal decided that the court
of first instance was justified in
deciding the case on that basis as the evidence permitted it.
The court of first instance
in
Armagas
(Staughton J) would appear to have proceeded on a similar
basis.)
[44]
The difficulty is that AfrAsia did not
adduce any evidence in support of the contention that Paget was
clothed with apparent authority
by Royal
Anthem
either to bind it in the
transactions, or to convey a decision by its board to commit to the
transactions; or that it relied on
any such representation in
entering into the transactions.  The arguments that its counsel
sought to advance to that effect,
relying on Paget having been given
the title deeds and financial records, were based on evidence adduced
by Royal Anthem as part
of the narrative of Muller’s dealings
with Paget in regard to the sale of his shares to Market Demand
Trading.  Muller
and Royal Anthem’s attorney, Eloff,
testified to the fact that Paget had been given the original title
deeds to the properties
and the financial records of the company when
the shares were purchased.  Van Zyl and Deetleefs, who
represented AfrAsia in
dealing with Paget and Dixon, purportedly on
behalf of Royal Anthem, did not relate in any detail how AfrAsia came
to treat with
Paget.  As far as can be discerned, the dealings
were predicated on Paget’s need to finance the operations of
another
company, and Royal Anthem was brought into the picture purely
as a consequence of AfrAsia’s requirement that security be
provided for any loan that it might be willing to advance.  Van
Zyl and Deetleefs did not explain how Paget’s possession
of the
title deeds or financial records was relied upon by them as a
representation by Royal Anthem that Paget was authorised to
represent
it, and thus causal of the conclusion of the limited guarantee
agreement.  It was not sufficient for AfrAsia merely
to point to
facts that could notionally have been relied upon by it as
representations by Royal Anthem of Paget’s authority
to
represent it; it had to establish representations upon which it
actually
did rely.  It is significant, as stressed by Royal Anthem’s
counsel, that the limited guarantee agreement was actually
executed
before what purported to be a resolution signed by both the company’s
directors was produced.  Van Zyl and
Deetleefs also did not
describe any conduct representing that Paget had authority to act on
the company’s behalf that could
be ascribable to Royal Anthem,
rather than just to Paget himself.  On the contrary, it is clear
that AfrAsia undertook its
own investigations, for it was in that
context that it discovered that Muller was a director and thereupon
insisted on a resolution
being produced signed by both directors.
As noted above, that was inconsistent with any acceptance by AfrAsia
that the transactions
were of a nature that it could treat with Paget
as actual or
de facto
managing director, or that he was possessed of authority, by himself,
to bind the company.
[45]
The knowledge that Paget was not the only
director of the company would also have alerted AfrAsia to the fact
that only limited
reliance could be placed on the fact that he
apparently controlled Royal Anthem’s sole shareholder.  It
would have appreciated
that the management of the business and
affairs of the company resorted in the board, not the shareholder;
see
s 66(1)
of the
Companies Act 71 of 2008
.  Indeed, the
documentation presented by AfrAsia to Paget and Dixon for completion
on behalf of Royal Anthem demonstrates
that the shareholder’s
resolution was required because of the specific requirements of other
provisions of the Act –
ss 45(3) and 65(11).
[46]
I
am also of the view that there is nothing in the evidence that would
justify a finding that Royal Anthem had held out Paget to
be a person
authorised on its behalf to communicate to outsiders the decisions of
its board of directors,
[19]
or
that AfrAsia relied on any such representation.  The facts do
not support any finding that while Paget did not have had
authority
to bind Royal Anthem to the transactions, the company had put him in
a position in which the outside world might reasonably
accept that he
was authorised to communicate the decisions of its organs that did
have such authority.  Paget was not a company
secretary or a
branch manager in a ‘bureaucratically complex organisation’,
or a company official holding an appointment
in which the
communication of decisions from above would ordinarily be accepted by
outsiders as being part of his everyday functions.
More
fundamentally, AfrAsia did not adduce any evidence to indicate that
it dealt with Paget on the basis that he had been
held out by Royal
Anthem to have authority to convey the board’s decision.
It did not really seek, evidentially,
to do that.  As described,
it sought rather to prosecute its claim on the basis of his alleged
actual authority, and in the
alternative to rely on s 20(7) of
the 2008
Companies Act.
[47
]
The
notion that AfrAsia should have to confirm with Muller that the
directors’ resolution apparently signed by him was genuine

might seem a tall order in the real world of commerce, but it finds
support in the remarks of Lord James of Hereford in
Ruben
v Great Fingall Consolidated
supra, at p. 447
[20]
and
in the out of the ordinary character of the transaction.  The
issue is whether Royal Anthem, rather than AfrAsia, both
of them
being innocent parties, should bear the consequences of Paget’s
fraud on AfrAsia.  Established principle indicates
that it
should do so only if its conduct held Paget out to be its apparently
authorised representative in the dealing in which
the fraud was
perpetrated.  AfrAsia has, however, failed to establish that the
fraud was committed by Paget acting within
the scope of his apparent
authority.  The hardship with which the common law approach can
confront outsiders dealing in good
faith with companies has been
considerably ameliorated by statutory intervention in some
jurisdictions.  The statutory intervention
was no doubt
motivated by the perceived need to bring the law concerning dealings
with companies into better alignment with commercial
realities.
[48]
So, for example, s 44 of the UK
Companies Act 2006 (c 46) provides in subsection (2) that ‘
A
document is validly executed by a company if it is signed on behalf
of the company – (a) by two authorised signatories,
or (b) by a
director of the company in the presence of a witness who attests the
signature
’ and goes on in
subsection (5): ‘
In favour of a
purchaser a document is deemed to have been duly executed by a
company
if it purports to be
signed in accordance with subsection (2)
.
A “purchaser” means a purchaser in good faith for
valuable consideration and includes a lessee, mortgagee or other

person who for valuable consideration acquires an interest in
property
’.  (My
underlining.)
In
Lovert & Anor
v Carson Country Homes Ltd
supra, it
was held (at para 80) that these provisions of s 44 were
‘
capable of validating also a document where there has
been fraud or forgery if the document purports to be signed in
accordance
with subsection (2)’.  An argument to the
contrary was rejected (at paras. 81-97).
[49]
Section
127(1)(a) of the Australian Corporations Act 2001 provides ‘
A
company may execute a document without using a common seal if the
document is signed by: (a) 2 directors of the company…
’.
A note to the provision points out that ‘
If
a company executes a document in this way, people will be able to
rely on the assumptions in subsection 129(5) for dealings in
relation
to the company
’.
Section 129(5) provides, insofar as pertinent, ‘
A
person may assume that a document has been duly executed by the
company
if
the document appears to have been signed in accordance with
subsection 127(1)
.
…
’.
[21]
(My underlining.)
[50]
Subsections
20(7) and 20(8) of our own
Companies Act 71 of 2008
[22]
do not go that far.
[23]
If they did, Royal Anthem would on the facts of this case be bound by
the contracts. The question whether Paget had ostensible
authority
would be irrelevant.  The outcome would be determined instead by
the effect of a statutory presumption.  The
statutory
presumption afforded in
s 20(7)
amounts to little, if anything,
more than a codification of the common law rule in Turquand’s
case in modified form.
[24]
It
does not provide the wider presumptions in favour of outsiders that
are manifest in s 44(2) and (5) of the UK
Companies Act of 20
06,
or in
s 127(1)(a)
read with s 129(5) of the Australian 2001
Corporations Act.
[51]
Section 20(7) therefore did not relieve
AfrAsia of the burden of having to establish at least the ostensible
authority of Paget
to have concluded the contracts or conveyed the
authority apparently given by the board of Royal Anthem for their
conclusion.
As discussed, AfrAsia failed to discharge that
burden.
[52]
In short, I am not satisfied that the
requirements set out in
NBS Bank Ltd v
Cape Produce Co
supra, listed in
paragraph [33]
above, have been met on the
evidence.  In the result, AfrAsia has failed to establish that
Royal Anthem is bound by the limited
guarantee agreement, and the
application in case no. 18299/2013 therefore falls to be
dismissed.  That conclusion makes
it strictly unnecessary to
consider the other defences raised by Royal Anthem, but I shall
nevertheless do so, albeit as briefly
as possible, in case the matter
be taken on appeal and another court persuaded to a different
conclusion on the issue of authority
or the ambit of s 20(7).
The other defences fall for that purpose to be approached on the
assumption, against my finding,
that Paget’s conduct
purportedly on behalf of Royal Anthem had been clothed with the
requisite authority.
Royal Anthem’s
other defences in the application in case no. 18299/2013
[53]
Had
it established Paget’s authority to represent Royal Anthem, I
consider that AfrAsia’s invocation of s 20(7)
of the 2008
Companies Act to
meet Royal Anthem’s reliance on alleged
non-compliance with various provisions of the Act
[25]
would have been justified.  The resolutions by the shareholder
and purportedly by the directors of Royal Anthem presented
to AfrAsia
gave the latter every reason to believe that the pertinent
requirements of the Act had been satisfied.
[26]
[54]
The limited guarantee agreement was subject
to the fulfilment of a number of conditions precedent recorded in the
loan agreement
between AfrAsia and Craigan.  These were
expressed to have been included exclusively for the benefit of
AfrAsia, which was
entitled by written notice to waive or defer
compliance with them.  Royal Anthem alleged that the agreement
had lapsed by
reason of the non-fulfilment of certain of these
‘advance conditions’ before the defined ‘cut-off
date’
of 17h00 on 6 August 2013.
[55]
The ‘Advance Conditions’, which
were set out in Annexure 1 to the loan agreement, went as follows:
1
The Lender delivering to the Borrower
written confirmation that the Lender is satisfied with the due
diligence investigation into
the affairs of the Borrower group.
2
The approval of the transactions
contemplated in the Finance Documents by the Lender’s
Investment Committee.
3
The Borrower Shareholder Cession is entered
into and becomes unconditional (except for any condition which
requires that this Agreement
must be entered into and must become
unconditional).
4
Each Guarantee is entered into and becomes
unconditional (except for any condition which requires that this
Agreement must be entered
into and must become unconditional).
5
Each Limited Guarantee is entered into and
becomes unconditional (except for any condition which requires that
this Agreement must
be entered into and must become unconditional).
6
The Lender has received each Mortgage Bond
Power of Attorney, and any other documents which it may, in its sole
discretion, require
in order to attend to the registration of the
relevant Mortgage Bond.
7
The Subordination Agreement is entered into
and becomes unconditional (except for any condition/s which require
that this Agreement
must be entered into and must become
unconditional).
8
The board of directors of the Borrower
passes a resolution resolving that the Borrower concludes each
Finance Document to which
it is a party and appointing a named person
to execute such Finance Document on behalf of the Borrower, and that
copies of such
resolutions have been delivered by the Borrower to the
Lender.
9
The board of directors of the Borrower
Shareholder and Property Owner –
9.1
passes a resolution resolving that that the
Borrower Shareholder and Property Owner concludes each Finance
Document to which it
is a party and appointing a named person to
execute such Finance Document on behalf of the Borrower Shareholder
and Property Owner;
9.2
confirming, in accordance with the
provisions of
sections 45(3)(b)(ii)
of the
Companies Act, that
the
respective boards of directors of the Borrower Shareholder and
Property Owner are satisfied that the terms under which any
direct or
indirect financial assistance pursuant to any of the Finance
Documents to which it is a party proposed to be given by
the Borrower
Shareholder and Property Owner are fair and reasonable to the
Borrower Shareholder and Property Owner;
9.3
in relation to the making of any proposed
“distribution” (as defined in the
Companies Act) pursuant
to the Finance Documents to which the Borrower Shareholder and
Property Owner is a party that takes the form of the incurrence
of a
debt or other obligation by that Guarantor, as contemplated in
paragraph (b) of the definition of “distribution”
in
section 1
of the
Companies Act-
9.3.1
confirming, in accordance with
section
46(1)(b)
of the
Companies Act (as
read with
section 46(4)(a)
of the
Companies Act), that
it reasonably appears that the Borrower
Shareholder and Property Owner will satisfy the “solvency and
liquidity test”
(as defined in the
Companies Act) immediately
after completing such proposed “distributions”, and
9.3.2
resolving, in accordance with
section
46(1)(c)
of the
Companies Act, that
the board of directors of,
respectively, the Borrower Shareholder and each Property Owner has
acknowledged that it had applied
the ‘solvency and liquidity
test” (as defined in the
Companies Act) and
reasonably
concluded that that Guarantor will satisfy the “solvency and
liquidity test” immediately after completing
such proposed
“distribution”,
and
that a (
sic
) copies of such confirmations and resolutions have
been delivered by the Borrower to the Lender.
10
The shareholders of the Borrower
Shareholder and Property Owner approving in accordance with
section
45(3)(a)(ii)
of the
Companies Act, any
financial assistance to be
granted by the Borrower Shareholder and Property Owner pursuant to
section 45(2)
of the
Companies Act under
the Finance Documents to
which it is a party, and that a copy of such resolution has been
delivered by the Borrower to the Lender.
11
The Borrower has delivered to the Lender a
certificate dated not more that 5 (five) business days prior to the
Advance Date, under
the hand of the managing or financial director of
the Borrower in which the aforesaid person certifies that as at the
date of that
certificate –
11.1to
the best of his/her knowledge and belief and after making reasonable
internal enquiries, no fact or circumstances has occurred
since the
Signature Date which constitutes a Material Adverse Event;
11.2there
is no existing or pending industrial action against the Borrower
which, if resolved against the Borrower, could reasonably
be expected
to give rise to a Material Adverse Event;
11.3to
the best of his/her knowledge and belief and after making reasonable
internal enquiries, there is no current or pending material

litigation, investigation or proceeding against the Borrower, which
could reasonably be expected to give rise to a material Adverse

Event; and
11.4to
the best of his/her knowledge and belief and after making reasonable
internal enquiries, no Default has occurred or is occurring.
12
The fulfilment of any other condition as
the Lender may, after the Signature Date but before the Cut-off Date,
determine is reasonably
required on written notice to the other
Parties.
13
The Lender is satisfied with the form and
content of all documents to be delivered to it in terms of this
Annexure “1”.
14
The Lender delivers written notice (a “
CP
Confirmation Notice”
) to the
Borrower confirming that they are satisfied that the Advance
Conditions have been duly fulfilled.
[56]
Royal
Anthem contended that advance conditions 1 and 2 had not been met
because (i) written confirmation as required in terms
of
condition 1 had not been given and (ii) the lender’s
investment committee had not approved the transactions.
There
is no merit in either contention.  The Investment Committee of
AfrAsia Special Opportunities Fund Limited (the holding
company of
AfrAsia) approved the transactions on 25 July 2013.
[27]
This was conveyed to Paget through his intermediary Dixon by an
associate director of AfrAsia, Deetleefs, by email on 5 August

2013.
[28]
Royal Anthem was in
no position to gainsay that the holding company’s investment
committee served as AfrAsia’s investment
committee in terms of
the relevant group arrangements.
[57]
It was contended that conditions 3 and 4
were not fulfilled because Paget did not have the authority to act on
behalf of Royal Anthem
in concluding the limited guarantee
agreement.  I have already found that AfrAsia has failed on the
papers to establish that
Paget had at least ostensible authority to
represent Royal Anthem, but I agree with the submission in AfrAsia’s
counsel’s
heads of argument that the purported conclusion of
the limited guarantee agreement would have sufficed, as a matter of
fact, to
satisfy the conditions precedent.
[58]
Royal
Anthem’s contention that condition 8 had not been fulfilled was
advanced only faintly.  It was adequately rebutted,
I think, by
the content of Dixon’s email to Deetleefs of 29 July 2013 to
the effect that all the required resolutions, barring
that which had
to be co-signed by Muller, had been signed,
[29]
and the averment in AfrAsia’s replying affidavit (deposed to by
Van Zyl),
jurat
15 February 2016, that all the required resolutions were received by
email on 31 July 2013 and in hard copy the following day.
[30]
[59]
The fulfilment of condition 9 was contested
on the basis of the invalidity of the directors’ resolution
ostensibly adopted
by Royal Anthem on the basis that Muller knew
nothing of it and his signature on the document had been forged.
Of course,
if the agreement was never effectively concluded for the
reasons found in connection with the lack of authority point, one
does
not reach the question of the fulfilment of the condition.
If, however, one accepts, as I consider must be done for present

purposes, that the agreement had been validly concluded, then it
would follow that the condition had been fulfilled when AfrAsia
was
presented with resolutions that appeared to satisfy its requirements.
[60]
The
most hotly contested questions in respect of the fulfilment of the
advance conditions were whether conditions 6 and 14 had been

fulfilled, waived or deferred.  That the powers of attorney to
register the two Royal Anthem surety bonds were received before
the
cut-off date is borne out by the correspondence vouched in the
papers,
[31]
culminating in an
email to David Deetleefs from AfrAsia’s Cape Town attorneys on
31 July 2013,
[32]
which
attached ‘
the
resolutions, power of attorney and bond application documents signed
today
’.
That there was a delay in the power of attorney in respect of one of
the bonds to be registered thereafter being
passed on to the
conveyancing attorneys, Gunstons, is beside the point.
[61]
As
mentioned, it was necessary in order to register a first mortgage
over Royal Anthem’s Franschhoek property in favour of
AfrAsia
that the existing bond over the property registered in favour of
Chesterfin be cancelled.  There were also bonds over
other
properties owned by entities in the Scarab Group to be given in
security registered in favour of
Investec
Bank, Pretoria Portland Cement Company Ltd (‘PPC’) and
the South African Bank of Athens (‘BoA’),
respectively.
The
documentation necessary to achieve the cancellation of the existing
bonds obviously formed part of that required in order to
attend to
the registration of the relevant mortgage bonds in favour of AfrAsia,
and therefore fell within the ambit of condition 6.
In
point of fact it became apparent that part of the proceeds of the
loan to Craigan would have to be applied to settle Chesterfin’s

claim against Royal Anthem to enable the cancellation of the bond in
its favour simultaneously with the registration of the bond
in favour
of AfrAsia.  I consider that it was apparent from the email
correspondence traversed in paragraph 54.1-54.12 of
the affidavit
deposed to by Van Zyl on 2 July 2015,
[33]
that both parties accepted that a delay in the provision of the
required documentation was unavoidable and that this would not
result
in the agreement lapsing.  In my view it is therefore clear that
both parties accepted that fulfilment of conditions
6 and 14 was
being waived or deferred.  I do not consider that it is open to
Royal Anthem in good faith to contend otherwise.
The
correspondence served adequately to give the contractually required
‘written notice’ of the waiver or deferment.
[62]
I am also in agreement with the submission
by AfrAsia’s counsel, if I understood it correctly, that
condition 14 was in any
event ineffectual by reason of its
potestative character.  It was not purely potestative in a way
that would invalidate the
contract, but rather of a mixed potestative
character; its fulfilment was not dependent on the whim of AfrAsia
(
si volam
),
but with reference to the fulfilment of the other conditions
precedent.  Thus, if the other conditions were fulfilled,
AfrAsia could not avoid the contract by purporting to withhold the CP
Confirmation Notice.  Equally, non-fulfilment of the
condition
was not something that Royal Anthem would have been entitled to rely
on to escape the contract in the face of AfrAsia’s
performance
thereunder after the other conditions had been satisfied.
[63]
Royal
Anthem also contended that the advances that were made by AfrAsia
were made inconsistently with the provisions of the loan
agreement
and therefore could not be characterised as advances in terms of the
agreement.  If the contention were good, it
would follow that
the loan actually made was not subject to the limited guarantee given
by Royal Anthem.  There is no merit
in the contention in my
judgment.  It is based on an argument that it was inconsistent
with the loan agreement for AfrAsia
to have lent Craigan
approximately R16,5 million in two tranches, rather than the
entire R22 million provided for in the loan
agreement as a single
advance.  The wording of the loan agreement does not support the
argument.  I do not find it necessary
to illustrate the point
exhaustively.  It is sufficient in my view merely to refer to
clause 7.2 of the loan agreement,
[34]
which makes it plain that it was contemplated that the loan amount
would be advanced in a number of tranches, including amounts
required
for the settlement of the claims of the Bank of Athens (‘BoA’)
and Chesterfin.  I also agree with the
submission by AfrAsia’s
counsel that the construction of the loan agreement upon which Royal
Anthem’s contention in
this regard is founded is
unbusinesslike.  It is well established that courts should lean
against construing contracts to
give unbusinesslike results, or to
render the parties’ evident business intentions
ineffectual.
[35]
[64]
Finally,
although not logically indicated in the context of the finding that
has been made about AfrAsia’s failure to establish
Paget’s
authority to have represented Royal Anthem, something should perhaps
be said about Royal Anthem’s contention
that the failure by
AfrAsia to have ascertained Paget’s lack of authority was as a
consequence of its failure to have complied
with s 21(1) of the
Financial Intelligence Centre Act 38 of 2001 (‘FICA’)
[36]
and the associated regulations.
[37]
The obvious implication of the contention is that the applicant is an
‘accountable institution’ as defined in
s 1 read
with Schedule 1 of the Act.  I do not think that Royal Anthem
has adduced the evidence about the business of
AfrAsia that would be
necessary to characterise it as qualifying as an institution listed
in Schedule 1.  Furthermore, and
in any event, I am not
persuaded of the relevance of an accountable institution’s duty
of information gathering in terms
of FICA to what might reasonably be
expected of a person transacting with a company in respect of
accepting the authority of a
person held out by the company as having
the requisite authority to represent it in the transaction.  The
information that
an accountable institution is required to obtain in
terms of FICA has to be collected for the purposes of combatting
money laundering
and the financing of terrorist activities.  The
legislation is not directed in any way that I am able to discern at
raising
the bar for the ability of any person dealing with a company
to rely on ostensible authority.
Remedy
[65]
By virtue of the conclusion reached in
paragraph [52]
above, the application by
AfrAsia in case no. 18922/2013 falls to be dismissed.
Costs ordinarily follow the result, but
I do not think it would be
fair for that to happen mechanically in the current case.  A
considerable amount of the voluminous
papers generated in the matter,
as well as time and space spent in oral and written argument was
directed at dealing with defences
raised by Royal Anthem that had no
merit.  In circumstances I consider that justice would be served
if AfrAsia’s liability
in costs in the application were to be
limited to 75 per cent of Royal Anthem’s costs, such costs to
include those incurred
by the engagement of two counsel.
[66]
It
does not seem appropriate to uphold Royal Anthem’s
counter-application.  I hold this view for two reasons.
Firstly, the ground upon which it was founded has been rejected as
unsound;
[38]
and
secondly, it seems to me that it would be inappropriate to set aside
the mortgage bonds in circumstances in which the mortgagee’s

attempt to enforce the contracts upon which they are predicated by
way of motion proceedings has failed because of the effect of
the
Plascon-Evans rule.  I understand that the dismissal of
AfrAsia’s application in case no. 18922/2013 on the
basis
that Paget’s authority to have represented Royal Anthem in
concluding the contracts was not established on the papers
has an
equivalent effect to an order of absolution from the instance in
action proceedings.  Thus AfrAsia is not prevented
by the
dismissal of its application from seeking to enforce the contracts in
action proceedings.  That there is a possibility
it may seek to
do so might be inferred from the passages in its replying papers that
sought to question Muller’s evidence
that his signature on the
directors’ resolution had been forged.
[39]
If
action proceedings do follow, it seems to me that issue estoppel
might arise therein following on some of the findings in these

proceedings.  It seems to me therefore that an order for the
setting aside or cancellation of the bonds should follow only
once it
is clear that AfrAsia will not seek to proceed further by way of
action.  I consider that it would be appropriate
in the
circumstances to invite counsel for the parties, in consultation with
each other, to formulate a draft order for consideration
in this
respect.  Arrangements can be made, if necessary, for me to
receive any additional written or oral submissions that
the parties
might wish to make in that connection.
[67]
Similar considerations would appear to
apply in respect of AfrAsia’s application for rectification of
the mortgage bonds in
case no. 12562/2015.  AfrAsia
succeeded in making out a case for the rectification, but its success
will be of no practical
import if it does not succeed in establishing
that the underlying contracts were effectively concluded.  My
prima facie view
is that it would therefore be appropriate to make
the costs of that application stand over for determination as part of
the costs
of any future action that AfrAsia might institute or, that
failing the institution of such an action within a stipulated time,
the costs should be determined on the basis of there being no order
as to costs.  In this regard too, the indicated course
appears
to be to invite counsel to formulate a draft order for consideration,
with the opportunity being granted to the parties
to address argument
on the point if they wish.
[68]
The following order is made:
(a)
The application in case no. 18299/2013
is dismissed.
(b)
The applicant shall be liable for 75 per
cent of the sixth respondent’s costs of suit, such costs to
include the costs of
two counsel.
(c)
The parties are invited to approach me in
respect of the orders to be made in respect of the disposal of the
counter-application
in case no. 18299/2013 and the application
in case no. 12562/2015 (including the costs reserved in terms of
paragraph
4 of the order made in chambers, dated 24 March 2016), with
reference to the views expressed in paragraphs [25], [66]
and
[67]
of the judgment.
A.G.
BINNS-WARD
Judge
of the High Court
APPEARANCES
Applicant’s
counsel: W.R.E. Duminy SC
P.B.J.
Farlam SC
Applicant’s
attorneys: Korbers Inc
Cape
Town
Sixth
respondent’s counsel: L.M. Olivier SC
A.
Liversage
Sixth
respondent’s attorneys: Eloff Brink Attorneys
Pretoria
Edward
Nathan Sonnenbergs
Cape
Town
[1]
The same relief had been sought in action proceedings instituted by
Royal Anthem under case no. 7520/2014.  The action
was
withdrawn before the counter-application came up for hearing.
[2]
See paragraph [9], below.
[3]
In view of these findings it is unnecessary to consider the
admissibility of an affidavit by a former deeds office official,
now
employed by a firm of attorneys as a ‘property law advisor’,
that was tendered by Royal Anthem in support of
the contention that
rectification of the mortgage bonds in terms of
s 4
of the
Deeds Registries Act was
not competent.
[4]
See
Thienhaus
v Metje & Ziegler Ltd
1965
3 SA 25
(A), at 31H.
[5]
Cf.
Thienhaus
v Metje & Ziegler Ltd
supra,
at 31H-34D and 39A.
[6]
Cf.
Thienhaus
, NO v Metje & Ziegler Ltd and Another
supra, at 33
fin
.
[7]
Affidavit of Harold Murray Muller
jurat
18 June 2015, at para 11.
[8]
See C. Forsyth and J.T. Pretorius,
Caney’s
The Law of Suretyship in South Africa
(Juta) 6
th
ed. chap. 2.3, at pp. 32-33, s.v.‘Suretyship and the
contract of guarantee’.  Indeed, in its particulars
of
claim in the action under case no. 7520/2014, referred to in
note 1, above, Royal Anthem’s legal representatives

referred to the obligations undertaken by the company in terms of
the limited guarantee agreement as ‘binding Royal Anthem
as
surety and co-principal debtor…’.  (The deponent
to the supporting affidavit sought to explain the pleaded
allegation
by stating that he had been misled by the reference to a deed of
suretyship in the registered mortgage bond.)
[9]
See note 1, above.
[10]
The
principal deponent to the affidavits delivered by Afrasia called
into question whether Muller’s signature was in fact
a
forgery, but Muller’s averment that it was prevails for
present purposes on the Plascon-Evans rule.  See
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
[1984] ZASCA 51
;
1984 (3) SA 623
(A), at 634E-635C.
[11]
Royal
British Bank v Turquand
(1856) 6 E&B 327
[1856] EngR 470
; ;
119 ER 886.
[12]
Palmer’s
Company Law
at 3.331 [Palmer R123: November 2009] observes that ‘
The
whole area of agency rules as applied to companies is sometimes
referred to  … as the rule in
Turquand’s
case
’.
[13]
Section
20(7)
, had it been in operation at the time, might arguably have led
to a different determination in
Stand
242 Hendrik Potgieter Road Ruimsig (Pty) Ltd v Göbel NO and
Others
2011 (5) SA 1
(SCA), because it expressly includes a presumption in
favour of outsiders dealing with a company in good faith that the
company
has complied with all formal and procedural requirements of
the Act.
[14]
I would respectfully suggest that the citation of the passage from
Solomon JA’s judgment in
Robinson
v Randfontein Estates
should
have extended to p. 218.
[15]
What Diplock LJ in
Freeman
& Lockyer
supra, at 509, described as ‘normal’ contracts.
[16]
Van Zyl affidavit,
jurat
15 February 2016, para 13-27, at record pp. 1298-1304.
[17]
The facts in
First
Energy
are
summarised
in para 14 in the extract from the judgment in
Kelly
& Ors v Fraser
quoted
in paragraph [42], below.
[18]
Armagas
Ltd v Mundogas SA (The "Ocean Frost")
[1985] UKHL 11
;
[1986] AC 717
and
Lloyd
v Grace Smith & Co
supra, were referred to in passing by Howie JA in
Ess
Kay Electronics Pte Ltd and Another v First National Bank of
Southern Africa Ltd
2001 (1) SA 1214
(SCA) at para 20-22 in the context of the
effect of ostensible authority in respect of vicarious liability for
fraud in
South African law.
[19]
If
its articles of association or to use the language of the 2008 Act,
‘memorandum of incorporation’ did so, no evidence
of the
content thereof was adduced.
[20]
Lord
James stated ‘… [the outsider]
has
a safeguard which a company has not.  A company cannot protect
itself against the frauds of its secretary, and if the
company has
to bear the burden of this loss, of course the loss placed upon
companies will be very great, and they must guard
against it, but
certainly theoretically – I do not know whether it is quite
the case practically – the
[outsider]
has
a safeguard, he can always apply to the two directors whose names
appear on the certificate and inquire from them whether
those
signatures are valid and genuine signatures or not.  If the
answer is that they are genuine, the certificate of course
is valid;
if the answer is “No, I have not signed that certificate,”
then he is aware that it is invalid.  I
do not know whether in
commercial life
[outsiders]
will
take the trouble to inquire of directors whose signatures appear on
certificates whether those signatures are genuine or
not, but at any
rate there is that power if they choose to exercise it.
’
[21]
A statutory predecessor of ss 128 and 129 of the Corporations
Act 2001 was to be found in s 68A and 68D of the Companies
(New
South Wales) Code.  Section 68D expressly addressed the effect
of forgeries as follows:
68D.
Section 68A operates –
(a)
to entitle a person to make the
assumptions referred to in sub-section (3) of that section in
relation to dealings with a company,
or
(b)
to entitle a person to make the
assumptions referred to in sub-section (3) of that section in
relation to an acquisition or purported
acquisition (whether direct
or indirect) of title to property from a company,
notwithstanding
that a person referred to in paragraph 68A(3)(b), (c) or (e) or an
officer, agent or employee of the company referred
to in paragraph
68A(3)(d) or (f)-
(c)
has acted or is acting fraudulently
in relation to the dealings, or in relation to the acquisition or
purported acquisition of
title to property from the company, as the
case may be; or
(d)
has forged a document that appears to
have been sealed on behalf of the company,
unless
the person referred to in paragraph (a) or (b) of this section has
actual knowledge that the person referred to in paragraph
68A(3)(b),
(c) or (e), or the officer, agent or employee of the company
referred to in paragraph 68A(3)(d) or (f), has acted
or is acting
fraudulently, or has forged a document, as mentioned in paragraph
(c) or (d) of this section.
The provision
falls to be read with s 68A(1) and (3):
68A.(1)
A person having dealings with a company is, subject to sub-section
(4), entitled to make, in relation to those dealings,
the
assumptions referred to in sub-section (3) and, in any proceedings
in relation to those dealings, any assertion by the company
that the
matters that the person is so entitled to assume were not correct
shall be disregarded.
(3)
The assumptions that a person is, by virtue of sub-section (1) …
entitled to make in relation to dealings with a company,
or in
relation to an acquisition or purported acquisition from a company
of title to property, as the case may be, are –
(a)
that, at all relevant times, the memorandum and articles of the
company have been complied with;
(b)
that a person who appears, from returns lodged with the Commission
under section 238 or 263 or with a prescribed State authority
under
a corresponding provision of a previous law of the State to be a
director, the principal executive officer or a secretary
of the
company has been duly appointed and has authority to exercise the
powers and perform the duties customarily exercised
or performed by
a director, by the principal executive officer or by a secretary, as
the case may be, of a company carrying on
a business of the kind
carried on by the company;
(c)
that a person who is held out by the company to be an officer or
agent of the company has been duly appointed and has authority
to
exercise the powers and perform the duties customarily exercised or
performed by an officer or agent of the kind concerned;
(d)
that an officer or agent of the company who has authority to issue a
document on behalf of the company has authority to warrant
that the
document is genuine and that an officer or agent of the company who
has authority to issue a certified copy of a document
on behalf of
the company has authority to warrant that the copy is a true copy;
(e)
that a document has been duly sealed by the company if –
(i)
it bears what appears to be an impression of the seal of the company
and
(ii)
the sealing of the document appears to be attested by 2 persons,
being persons one of whom, by virtue of paragraph (b) and
(c), may
be assumed to be a director of the company and the other of whom, by
virtue of paragraph (b) and (c), may be assumed
to be a director or
to be a secretary of the company; and
(f)
that the directors, the principal executive officer, the
secretaries, the employees and the agents of the company properly

perform or performed their duties to the company.
In
Story v.
Advance Bank Australia Limited
(1993) 31 NSWLR 722
(a case that
bears relevant similarities to the current matter), at 732, Gleeson
CJ noted that the Explanatory Memorandum that
had attended the
introduction of the legislation recorded that it was intended, in
part, to ‘do away with’ the effect
of the judgment in
Ruben v Great Fingall Consolidated
supra.
[22]
Quoted in paragraph [31] above.
[23]
Cf.
One
Stop Financial Services (Pty) Ltd v Neffensaan Ontwikkelings (Pty)
Ltd and Another
supra,
at para 50-56.  I do not think
s 5(2)
of the
Companies Act, which
provides that ‘
To
the extent appropriate, a court interpreting or applying this Act
may consider foreign company law
’,
permits stretching the language of s 20(7) to impliedly address
the matters expressly provided for in the English
and Australian
statutes, but notably omitted in our own.
[24]
In
Davis et al,
Companies
and other Business Structures in South Africa
3
rd
ed. 2013 (OUP) at p. 59, it is opined that ‘
The
Companies Act, 2008
abolishes the doctrine of constructive notice,
but preserves the Turquand rule for the benefit of outsiders only.
Corporate
insiders, such as directors, company officers and
shareholders, derive no protection from the rule
’.
See also the note by Professor P. Deport, ‘
Companies
Act 71 of 2008
and the “Turquand Rule”
’,
(2011) 74 THRHR 132
in which the modifications to the Turquand rule
in
s 20(7)
are highlighted and the resultant uncertainty
created by the juxtaposed
s 20(8)
, which appears to be intended
to retain the operation of the common law concurrently with the
statutory provision, is described
as ‘disconcerting’.
Delport also observes, quite pertinently in my view, at p. 138,
‘
The
position is complicated even further due to the fact that the
common-law rules regulating representation of the company were,
for
some inexplicable reason, also retained, which increases the present
uncertainty and risks for the company and third party
alike in the
application of the
Turquand
rule.  Apart from examples in foreign jurisdictions where the
issues regarding representation and
Turquand
were successfully and efficiently solved (see s40 of the British
Companies Act 2006 (C 46) and ss 15(1) and 18(a) of the Canada

Business Corporation Act RSC 1985 (C 44),
sections 17
and
54
of the
Close Corporations Act 69 of 1984
could also have served a good
basis to do the same in South African company law …
’.
[25]
Royal Anthem alleged non-compliance with
section
66
, read with
section 73
and item 7(5) of Schedule 5; (ii)
section
45
, alternatively
section 218(1)
and (iii)
section 75
,
alternatively section 218(1) of the 2008 Companies Act.
[26]
See
note 13
above.
[27]
The minutes of the committee meeting were annexed as annexure K2 to
the affidavit of Van Zyl,
jurat
2 July 2015, at record p. 661.
[28]
The email is annexure K2 to the affidavit of Van Zyl,
jurat
2 July 2015, at record p. 660.
[29]
Annexure R10, at record p. 975
[30]
Van Zyl’s affidavit
jurat
15 February 2016, para 65, at record p. 1322.
[31]
Van Zyl’s affidavit
jurat
15 February 2016,
para
64.5 and 64.6, record pp. 1318-1319, read with annexure R2(5)
thereto at record pp. 1408-1412.
[32]
Van Zyl’s affidavit
jurat
15 February 2016,
para
64.7, record pp. 1319-1320, read with annexure R2(6) thereto at
record p. 1418.
[33]
Record pp. 583-586.
[34]
Clause 7.2 of the loan agreement provided:
Accordingly,
pursuant to clause 7.1, the Lender shall only be obliged to transfer
the Borrower
(sic)
the balance of the Loan Amount remaining
after such payment to the Lender’s Conveyancer (ie. the
difference between (i)
the Loan Amount and (ii) the aggregate of the
BoA Loan Outstandings and the Chesterfin Loan Outstandings) in
accordance with
clause 6.4.
[35]
See e.g.
DA
Meyer Consultants CC v Allied Electronic Corporation Ltd &
Others
[1996] ZASCA 33
;
1996
(3) SA 370
(A) at 373I-374H and 383C;
Langston
Clothing (Properties) CC v Danco Clothing (Pty) Ltd
[1998] ZASCA 66
;
1998
(4) SA 885
(SCA) at 888I-889F;
Lloyds
of London Underwriting Syndicates 960, 48, 1183 and 2183 v Skilya
Property Investments (Pty) Ltd
2004
(2) SA 276
(SCA) at para 14;
Ekurhuleni
Metropolitan Municipality v Germiston Municipal Retirement Fund
2010
(2) SA 498
(SCA) at para 13 and
Novartis
SA (Pty) Ltd v Maphil Trading (Pty) Ltd
2016 (1) SA 518
(SCA) at para 30-31.
[36]
Section 21(1) of FICA provides:
Identification
of clients and other persons
(1) An
accountable institution may not establish a business relationship or
conclude a single transaction with a client unless
the accountable
institution has taken the prescribed steps-
(a) to
establish and verify the identity of the client;
(b) if the
client is acting on behalf of another person, to establish and
verify-
(i) the
identity of that other person; and
(ii) the
client's authority to establish the business relationship or to
conclude the single transaction on behalf of that other
person; and
(c) if
another person is acting on behalf of the client, to establish and
verify-
(i) the
identity of that other person; and
(ii) that
other person's authority to act on behalf of the client.
[37]
The
Money
Laundering and Terrorist Financing Control Regulations
published under GN R1595 in GG 24176 of 20 December 2002, as amended
by GN R456 in GG 27580 of 20 May 2005, GN R867 in GG 33596
of 1
October 2010 and GN 1107 in GG 33781 of 26 November 2010.
[38]
See paragraph [21] above.
[39]
See note 10, above.