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[2017] ZASCA 20
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ZNK Investments CC v Luckytso Transport and Construction CC and Others (328/2016) [2017] ZASCA 20 (24 March 2017)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Not
reportable
Case
No: 328/2016
In
the matter between:
ZNK
INVESTMENTS
CC
APPELLANT
and
LUCKYTSO
TRANSPORT AND
CONSTRUCTION
CC
FIRST RESPONDENT
LUCKY
KGOMOTSO MOKWENA
SECOND RESPONDENT
ABSA
BANK
LIMITED
THIRD RESPONDENT
SHERIFF
PRETORIA EAST
FOURTH RESPONDENT
DEEDS
OFFICE
PRETORIA
FIFTH RESPONDENT
THE
DEPARTMENT OF
FINANCE
SIXTH RESPONDENT
THE
COMPANIES AND INTELLECTUAL
PROPERTY
COMMISSION
SEVENTH RESPONDENT
Neutral
citation:
ZNK
Investments CC v Luckytso Transport and Construction CC
(328/2016)
[2017] ZASCA 20
(24 March
2017)
Coram:
Maya
AP, Theron and Van der Merwe JJA and Gorven and Coppin AJJA
Heard:
2 March 2017
Delivered:
24
March 2017
Summary:
Company law: sale
in execution of property of close corporation whilst deregistered:
reinstatement in terms of
s 82(4)
of the
Companies Act 71 of
2008
: automatic retrospective validation of the sale in execution.
ORDER
On
appeal from
Gauteng
Division of the High Court, Pretoria (N M Mavundla
J sitting as court of
first instance):
1
The appeal is upheld with costs, including the costs of two counsel.
2
Paragraphs 2 and 3 of the order of the court a quo are set aside and
replaced with the following:
‘
2
The applicants are directed to pay the costs of the application.’
JUDGMENT
Van
der Merwe JA (Maya AP and Theron JA and Gorven and Coppin AJJA
concurring):
[1]
This appeal concerns the effect of the retrospective reinstatement of
the registration of a close corporation on a sale in execution
of its
property that took place whilst it was deregistered. The issue has to
be determined in light of the circumstances set out
below.
[2]
In 2006, the first respondent, Luckytso Transport and Construction
CC, became the registered owner of the immovable property
known as
portion 2 of erf 1704, Silver Lakes Extension 4, Gauteng (the
property). At the same time a mortgage bond in favour of
the third
respondent, Absa Bank Ltd (Absa), was registered over the property.
At all relevant times the second respondent, Mr Lucky
Kgomotso
Mokwena, was the sole member of the first respondent. He bound
himself to Absa as surety and co-principal debtor in respect
of the
obligations of the first respondent arising from the mortgage bond.
[3]
On 19 October 2011, Absa obtained default judgment against the first
respondent and the property was declared executable. On
1 March 2013,
the first respondent was deregistered for failure to submit annual
returns, in terms of
s 82(3)
(a)
of the
Companies Act 71 of 2008
. In terms of
s 26
of the
Close
Corporations Act 69 of 1984
, the provisions of, inter alia,
s 82(3)
to (4) and
s 83
of the
Companies Act apply
to a close
corporation.
[4]
The fourth respondent, the Sheriff of Pretoria East (the sheriff),
attached the property for purposes of the sale thereof in
execution.
It does not appear from the evidence whether the attachment took
place before or after 1 March 2013, but as I will show,
nothing turns
on this. The sale in execution was to take place on 30 October 2013,
but due to the intervention of the second respondent
it did not
proceed on that date. However, on 29 January 2014, the sheriff sold
the property in execution to the appellant, ZNK
Investments CC, for
the amount of R2 520 000. There is no evidence that at the
time of the sale in execution Absa, the
sheriff or the appellant was
aware of the deregistration of the first respondent.
[5]
On 21 February 2014, the first and second respondents brought an
application in the Gauteng Division, Pretoria. The respondents
cited
Absa, the appellant, the sheriff and the Companies and Intellectual
Property Commission (CIPC) as respondents in the application,
amongst
others, who are not necessary to mention. Both the first and second
respondents (the respondents) sought an order, inter
alia, that the
CIPC be authorised to reinstate the first respondent and that the
sale in execution of the property to the appellant
be declared
invalid and set aside. Only the appellant opposed the application.
[6]
The court a quo (Mavundla J) granted the relief sought. Paragraph 1
of its order directed the CIPC to reinstate the first respondent.
The
CIPC does so in terms of
s 82(4)
of the
Companies Act. In
terms
of paragraph 2 of the order, the sale in execution of the property
which took place on 29 January 2014, was declared invalid
and set
aside. The court a quo also ordered the appellant to pay the costs of
the application (para 3). The court a quo reasoned
that the
deregistration had put an end to the existence of the first
respondent and rendered Absa’s claim against the first
respondent unenforceable. It also held that the property became
bona
vacantia
and vested
in the State. The court a quo held that on both these grounds, the
deregistration of the first respondent rendered the
sale in execution
of the property invalid and that it fell to be set aside. In respect
of the latter ground, reliance was placed
on
ABSA
Bank Ltd v Companies and Intellectual Property Commission &
others
2013 (4) SA
194
(WCC). In that case, an attachment and sale in execution of
property of a close corporation took place after its deregistration
and the court held that the sale was invalid.
[7]
The appellant sought leave to appeal only against paragraphs 2 and 3
of the order of the court a quo. Leave to appeal was refused
by the
court a quo but granted by this court on limited grounds. The order
of this court provided:
‘
4.
The leave to appeal is limited to the following issue: Whether the
retrospective operation
of the order in paragraph 1 had the effect
that the sale in execution of the first respondent’s property
was valid.
5.
The leave to appeal is limited to paragraphs 2 and 3 of the order of
the court
a
quo
.’
[8]
It is true that upon the deregistration of a company or close
corporation, its property becomes
bona
vacantia
(ownerless
property). Such property passes to the State without any form of
delivery. See
Rainbow
Diamonds (Edms) Bpk & Andere v Suid-Afrikaanse Nasionale
Lewensassuransiemaatskappy
1984 (3) SA 1
(AD) at p 10-12. Thus, at the time of the sale in
execution the ownership of the property vested in the State.
[9]
The crucial issue, however, is the legal effect of the reinstatement
of a close corporation in terms of
s 82(4)
of the
Companies Act.
This
question was not considered by the court a quo, but it was
subsequently decided by this court in
Newlands Surgical Clinic
(Pty) Ltd v Peninsula Eye Clinic (Pty)
Ltd
2015 (4) SA 34
(SCA).
After a thorough analysis of the provisions of
ss 82
and
83
of
the
Companies Act, Brand
JA, in a unanimous judgment, concluded
(i)
that reinstatement of registration by the CIPC in terms of
s 82(4)
automatically and retrospectively revests a company (or close
corporation) with its property and validates its corporate activities
during the period of its deregistration (para 29); and
(ii)
that even after administrative reinstatement in terms of
s 82(4)
,
a party who is prejudiced by the automatic retrospective effect
thereof, is afforded the opportunity to seek amelioration
under
s 83(4)
, in which event the court may grant the relief it
considers just and equitable (para 30).
In
the result,
ABSA v
CIPC
is no longer
good law on this point.
[10]
Reinstatement of the first respondent pursuant to para 1 of the order
of the court a quo, would automatically and retrospectively
revest
the property in the first respondent and validate its corporate
activities during the period of deregistration. The attachment
of the
property (if it took place after deregistration) and the sale in
execution were corporate activities of the first respondent
during
its deregistration. They would be retrospectively validated in the
same manner as the arbitration proceedings in
Newlands
Surgical
and the
winding up of a close corporation in
Reddy
v Absa Bank Ltd & others
[2015] ZASCA 83
(28 May 2015).
[11]
The next question is whether the respondents made a case for
amelioration of this position in terms of
s 83(4).
Counsel for
the respondents correctly conceded that no such case had been made in
the papers. The respondents claimed relief only
on the ground that
the first respondent had been deregistered when the sale in execution
took place. It is noteworthy that it was
not alleged that the
respondents were unaware of the deregistration. It is significant,
moreover, that the respondents did not
state that they have a defence
against Absa’s claim.
[12]
For these reasons the court a quo ought to have refused to set aside
the sale in execution. It is clear that the main purpose
of the
application was to nullify the sale of the property to the appellant.
The refusal of this relief should have resulted in
substantial
success for the appellant in the court a quo. In my judgment the
respondents must bear the costs in the court below.
Costs of the
appeal should follow the result. Counsel were in agreement that the
employment of two counsel was justified.
[13]
In the result the following order is issued:
1
The appeal is upheld with costs, including the costs of two counsel.
2
Paragraphs 2 and 3 of the order of the court a quo are set aside and
replaced with the following:
‘
2
The applicants are directed to pay the costs of the application.’
__________________
C
H G van der Merwe
Judge
of Appeal
Appearances
For
the Appellant:
C Whitcutt SC (with
him T Lipshitz)
Instructed
by:
Boqwana
Burns Attorneys, Pretoria
Claude
Reid Attorneys, Bloemfontein
For
the
First and Second Respondent: J Vorster (with him J C
Prinsloo)
Instructed
by:
Shubnam
Singh Attorneys, Pretoria
Bezuidenhout
Attorneys, Bloemfontein