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[2012] ZAECPEHC 41
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Sage Wise 24 CC t/a Steel Doors and Frames v Chothia, Vulcania Reinforcing Company (Pty) Ltd v Chothia (1067/12, 1234/12) [2012] ZAECPEHC 41 (26 June 2012)
Not Reportable
IN
THE HIGH COURT OF SOUTH AFRICA
(EASTERN
CAPE, PORT ELIZABETH)
In
the matters between:
Case No. 1067/12
SAGE
WISE 24 CC t/a STEEL
DOORS
AND FRAMES
….......................................................
(Plaintiff/Applicant)
and
Case No. 1234/12
VULCANIA
REINFORCING
COMPANY
(PTY) LIMITED
…..............................................
(Plaintiff/Applicant)
and
CASSIM
CHOTHIA
…......................................................
(Defendant/Respondent)
JUDGMENT (In separate applications for summary judgment)
HARTLE
J,
In two separate actions the plaintiffs seek summary
judgment against a common defendant in his capacity as sole member
of
Allbuild Distributors
CC
(“
Allbuild”
).
1
In both matters
Allbuild
is alleged to have
become indebted to the plaintiffs for goods sold and delivered
pursuant to credit agreements entered into
with the close
corporation in 2007. In 2009 the plaintiffs separately obtained
default judgments against it in the Free State
High Court,
Bloemfontein, arising from such indebtedness. The plaintiffs allege
that despite endeavours to execute the judgments
they remain
unsatisfied.
They further plead that subsequent to obtaining the
judgments
Allbuild
was
“
placed in final deregistration
”
.
An identical “
certificate of
disclosure
”
issued by the Registrar of
Companies & Close Corporations is annexed to the respective
particulars of claim, purportedly in
substantiation of this fact.
They are dated as at 9 November 2011 and reflect an enterprise
status of “
Deregistration Final
”
.
2
A separate annexure common to each statement of claim
reflects that the defendant was appointed sole member of
Allbuild
on 12 March 2008.
The plaintiffs rely for their claims upon the now
defunct provisions of section 26 (5) of the Close Corporations Act,
no 69 of
1984 (“
The Act
”). Until its amendment by
section 224
(2) of the
Companies Act no 71 of 2008
, which came into
effect on 11 May 2011, the original
section 26
provided as follows:
“
Section
26
0.
5in; text-indent: 0.08in; margin-top: 0.17in; margin-bottom: 0in; line-height: 150%">
26. Deregistration.
—
(1) If
a corporation has failed, for a period of more than six months, to
lodge an annual return in compliance with
section
15A
or
if the Registrar has reasonable cause to believe that a corporation
is not carrying on business or is not in operation, the Registrar
shall serve on the corporation at its postal address a letter by
registered post in which the corporation is notified thereof and
informed that if the Registrar is not within 60 days from the date of
the letter informed in writing that the corporation is carrying
on
business or is in operation, the corporation will, unless good cause
is shown to the contrary, be deregistered.
(2) After
the expiration of the period of 60 days mentioned in a letter
referred to in subsection (1), or upon receipt
from the corporation
of a written statement signed by or on behalf of every member to the
effect that the corporation has ceased
to carry on business and has
no assets or liabilities, the Registrar may, unless good cause to the
contrary has been shown by the
corporation, deregister that
corporation.
(3) Where
a corporation has been deregistered, the Registrar shall give notice
of such deregistration and the date thereof
in the prescribed manner.
(4) The
deregistration of a corporation shall not affect any liability of a
member of the corporation to the corporation
or to any other person,
and such liability may be enforced as if the corporation were not
deregistered.
(5) If
a corporation is deregistered while having outstanding liabilities,
the persons who are members of such corporation
at the time of
deregistration shall be jointly and severally liable for such
liabilities.
(6) The
Registrar may on application by any interested person, if he or she
is satisfied that a corporation was at the
time of its deregistration
carrying on business or was in operation, or that it is otherwise
just that the registration of the
corporation be restored, restore
the said registration: Provided that if a corporation has been
deregistered due to its failure
to lodge an annual return in
compliance with
section
15A
,
the Registrar may only so restore the registration of the corporation
after it has lodged the outstanding annual return and paid
the
outstanding prescribed fee in respect thereof.
(7) The
Registrar shall give notice of the restoration of the registration of
a corporation and the date thereof in the
prescribed manner and as
from such date the corporation shall continue to exist and be deemed
to have continued in existence as
from the date of deregistration as
if it were not deregistered.”
The jurisdictional facts necessary for liability in
terms of the original section 26 (5) of the Act are:
the deregistration of the close corporation;
at the time of deregistration the close corporation
must have outstanding liabilities; and
the person sought to be held liable must be a
member(s) of the close corporation at the time of it’s
deregistration.
3
The sub-section imposes a civil liability upon members
for debts of the corporation at the time of deregistration, thus
seeking
to avoid potential prejudice to creditors, as well as
penalizing members where the Registrar would in all probability have
refused
to deregister the corporation had its members apprised him
of its true state of affairs. It is a liability which has been
described
as “
a civil penalty
.”
4
The new section 26, post amendment by
section 224
(2)
of the
Companies Act 2008
, reads as follows:
“
26.
Deregistration.
—
Sections
81
(1) (
f
),
81 (3)
,
82 (3) to (4), and 83 of the
Companies Act, each
read with the
changes required by the context, apply with respect to the
deregistration of a corporation, but a reference in any
of those
provisions to a company must be regarded as a reference to a
corporation for the purposes of this Act”.
Nowhere in any of the aforementioned sections of the
Companies Act is
there any reference to the liability of members for
the debts of a corporation post deregistration such as was
specifically provided
for in
section 26
(5).
When the matter was argued before me the parties
accepted, correctly so in my view, that the effect of the amendment
to section
26 of the Act is that where personal liability of members
has accrued before the effective date of the coming into operation
of the
Companies Act, this
is not impacted by the amendment and,
conversely, where deregistration takes effect after the effective
date of the repeal, the
civil penalty of personal liability no
longer pertains.
5
This background is significant in the context of the
defences which the defendant raises to the plaintiff’s claims
for summary
judgment. The primary defence relied upon at the outset
- and which he alleges in his affidavits filed in opposition to the
application
constitutes a “
complete defence
” in
each case, is that the plaintiffs’ causes of action arose in
2007 when the goods were supplied on credit to
Allbuild
, more
than three before the issue of summons, hence the claims have become
prescribed.
What this argument overlooks,
however, is that the date of deregistration - and not the date on
which the liability of the close
corporation arose, is the more
significant. This is because deregistration is the “
trigger
”
for the personal liability
of a member to be fixed in terms of the original section 26 (5) of
the Act. Until deregistration, no
liability accrues with the
concomitant result that no “
debt
”
as envisaged in terms of
section 12
of the
Prescription Act, no 68 of 1969
, is due.
6
The prescription period of
the liability under section 26 (5) of the Act accordingly begins to
run in terms of section 11(d) of
that act only on deregistration of
the corporation and not when the original debts became due.
7
When the matter was argued before me Ms.
Ayerst
who appeared for the defendant conceded that the defence of
prescription did not avail him in the circumstances.
The second defence raised by the defendant (also
alleged by him to constitute “
a complete defence
”
to the plaintiffs’ claims) is that since the new
Companies Act
has
substituted section 26 (5) of the Act, their respective claims
are no longer valid and are therefore bad in law. Accordingly -
so
the defendant alleges in his answering affidavit - the plaintiffs’
particulars of claim are excipiable since they fail
to set out a
valid claim in law in each case. In the latter regard it was
submitted that since the certificate of confirmation
referred to in
par 3 above postdates the date of the repeal of section 26 (5), the
subsection can no longer be relied upon as
providing the basis for
the plaintiffs’ respective claims.
Mr.
Gajjar
who appeared for the plaintiffs
argued conversely that since the defendant had conceded in his
answering affidavits that
Allbuild
was deregistered as a
close corporation “
during January 2011
”, this
brought the plaintiffs’ claims within the purview of section
26 (5) of the Act. Their failure to plead when
as a fact this took
place was, in his view, not critical. However - so the argument went
- the concession aforesaid had the effect
of perfecting the
respective particulars of claim inasmuch as the essential
jurisdictional fact had not been pleaded in all its
necessary
detail.
But even assuming that the plaintiffs’
particulars of claim can be amplified by a concession on the part of
the defendant,
I am not satisfied that his averment that some time
during January 2011 the close corporation was deregistered is an
adequate
allegation to establish the necessary jurisdictional fact
in this regard.
“
Deregistration
”
has
its own technical definition in terms of the Act which means “
the
cancellation of the registration of the corporation’s founding
statement
.”
8
Section 26 (3) provides that where a corporation has
been deregistered the Registrar shall “
give
notice of such deregistration and the date thereof in the prescribed
manner
”
. The date of a corporation’s
deregistration is therefore the date specified in the notice
published by the Registrar envisaged
in subsection 3. Such
publication must be effected in the prescribed manner, i.e. in the
manner prescribed by regulation.
9
Regulation 2A
10
provides in this regard that whenever a notice must be
given under section 26 it shall be given by the publication of a
notice
on the CIPRO portal.
11
Prior to its amendment by
section 62
of the
Corporate
Laws Amendment Act no 24 of 2006
,
12
subsection 3 provided that where a corporation had been
deregistered the Registrar was obliged to give notice to that effect
in
the Gazette and that the date of publication of such notice was
deemed to be the date of deregistration. Seemingly the amendment
to
inter alia
subsection
3
13
was focused on the ushering in of the electronic record
system, and now requires publication in that portal.
Given that the date of deregistration envisaged by the
Act is specific, therefore, a vague reference to the month in which
the
defendant alleges this occurred can hardly perfect an incomplete
cause of action which relies on this date, and in my view the
fact
of the Registrar’s notice of publication of this date on the
internet portal, as an essential jurisdictional fact.
The CIPRO
records which the plaintiffs have made available do not reflect the
date of deregistration which the Registrar has
specified pursuant to
the provisions of subsection 3. On the contrary, the certificate put
up by the plaintiffs creates the impression
that deregistration may
possibly have been effected on 9 November 2011, a date well after
the date of the substitution of section
26 (5). Further, since
deregistration is preceded by a process requiring notice (by
registered post) and the lapse of a prescribed
period of 60 days,
the defendant may have been alluding to the beginning of the formal
process by the Registrar pursuant to which
notice in terms of
section 26 (1) of the Act was served on
Allbuild
rather than
the final end thereof when he said it was deregistered as a close
corporation.
It is trite that in applications
for summary judgment, if the pleadings lack an essential averment to
sustain a cause of action
– in this instance the date of which
Allbuild
was “
deregistered
”
within the meaning
referred to in the Act, it follows that there will also be a failure
to verify under oath the existence of
a good cause of action.
14
Further, given the
confusion created by the absence of the specified date, I am not
persuaded that the plaintiffs’ case
in each instance is
“
unanswerable.
”
The possibility that the
specified date may be anywhere in between January and November 2011
may well provide “
a
complete defence
”
to
the plaintiffs’ claims as contended for by the defendant in
the circumstances.
The defendant raised a further defence that the
Plaintiffs and
Allbuild
were in agreement when the credit was
extended to it that the facility would attract neither the personal
suretyship of the members
of the corporation nor interest, but I
need not consider the effect of these conditions given the view I
have taken in the matters.
I am satisfied that the defendant has raised a
sustainable defence in each of the two matters under consideration
and that I am
bound to refuse summary judgment.
In the result the defendant is granted leave in both
applications to defend the actions, costs in both matters to be
costs in
the cause.
___________________
B
C HARTLE
JUDGE
OF THE HIGH COURT
Date
of application: 29 May 2012
Date
of judgment: 26 June 2012
Appearances:
For
Plaintiffs: Adv
H Ayerst
, instructed by
Marianne Scholtz
Attorneys
c/o
Rushmere Noach Attorneys
, Port Elizabeth
For
Defendant: Adv
G J Gajjar
, instructed by
Wayne Mac Gear,
Aneesah Campbell Attorneys
, Port Elizabeth
1
Since
the issues were identical and the parties’ representatives
common to both matters, the applications were heard together.
2
Evidently
the certificate is the product of a
CIPC
search to ascertain
the status of the corporation with reference to its Founding
Statement.
3
Lynn
& Main Incorporated v Kruger & Others
WLD Case No.
2000/23938 , unreported judgment of Blieden J dated 11 October 2007
4
Lynn
& Main Incorporated v Kruger & Other, Supra
at pg 5; See
also Mouton v Boland Bank Ltd
2001 (3) SA 877
(SCA) at 881 D - H
5
Zurcher’s
Electrical and Electronics CC v Peter Lister and Phillipa Susan
Kennedy
2012 JDR 0062 (ECP) – (Case No 2842/2011)
6
Zurcher’s
Electrical and Electronics CC v Peter Lister and Phillipa Susan
Kennedy, Supra
at par[13];
Lynn & Main Incorporated v
Kruger & Other, Supra
at pgs 6 – 7.
7
See
the article by Jopie Pretorius entitled “
An unpleasant
surprise
”,
2001 JBL 118
in which the concern is raised
that members may incur liability in terms of section 26 (5) of the
Act long after the original
debt owed by the corporation may have
become due or even have become prescribed.
8
Section
1 (1) of the Act.
9
See
the definition of “
prescribe
” in section 1 (1) of
the Act.
10
These
are the “Administrative regulations” dated 16 November
1984 ( as amended) promulgated under the Act by GNR 2487.
11
This
is the internet website or other portal forming part of the CIPRO
system which gives electronic content to the record retention
system. CIPRO means the Companies and Intellectual Property
Registration Office that constitutes a combined administrative
office for
inter alia
the registered office of the
Close
Corporations Act. The
Plaintiffs have not alleged when, according to
these records, notice was published by the Registrar
12
Effective
since 14 December 2007.
13
Regulation
2A
was inserted by GNR 292 of 13 March 2009.
14
Dowson
and Dobson Industrial Ltd v Van der Werf
1981 (4) SA 417
(CPD)
at 430- H