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[2016] ZAKZDHC 16
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Shanmugam v Peter N.O and Others (11638/2015) [2016] ZAKZDHC 16 (20 April 2016)
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IN
THE HIGH COURT OF SOUTH AFRICA
KWAZULU-NATAL
LOCAL DIVISION, DURBAN
Case
no: 11638/2015
DATE:
20 APRIL 2016
In
the matter between:
KRIVESHAN
SHANMUGAM
..........................................................................................
APPLICANT
And
LUNGA
COSMO PETER
N.O
.........................................................................
FIRST
RESPONDENT
C
B ST CLAIR COOPER
N.O
....................................................................
SECOND
RESPONDENT
LEBONGANG
MICHEAL MOLOTO
N.O
...................................................
THIRD
RESPONDENT
NICOLA
CRONJE
.......................................................................................
FOURTH
RESPONDENT
PETER
MASKEL
AUCTONEERS
.................................................................
FIFTH
RESPONDENT
STRAUSS
DALY
ATTORNEYS
......................................................................
SIXTH
RESPONDENT
Judgment
Order:
The
rule nisi is discharged with costs, including those reserved on 23
November and 8 December 2015 and those occasioned by the
employment
of senior counsel.
Ploos
van Amstel J
[1]
The applicant seeks an order interdicting the liquidators of CKT
Express CC (in liquidation) from selling or transferring an
immovable
property to a third party purchaser pending the determination of an
action which he has instituted and in which he seeks
transfer of the
property to him.
[2]
The basis of the applicant’s claim is that he purchased the
property from the liquidators in June 2012, that the agreement
is
still valid and that they are precluded from selling the property to
someone else.
[3]
The liquidators contend that the agreement relied on by the applicant
was invalid
ab initio
, that it was in any event cancelled by
reason of a breach by him and, further, that his claim for transfer
of the property has
become prescribed.
[4]
The facts are briefly as follows. The close corporation owns the
property in question, which is described as Portion 6 of Erf
[2……]
[L…..] [E……] [1….] and is situated at
[5…..] [A…..] [D…..],
[L……]. It
was placed in final liquidation in February 2012 and the first and
second respondents were appointed as
liquidators on 21 February 2012.
They decided to sell the property to the applicant and signed a
written agreement of sale on 5
June 2012. The agreement was not
signed by the third respondent, who was appointed as the third
liquidator on 4 June 2012. On 2
July 2012 a firm of attorneys gave
the applicant written notice that he was in breach of the agreement
in that he had not made
certain payments and on 16 August 2012 they
notified him of the cancellation of the agreement. Most of the money
which he had paid
towards the purchase price was refunded to him,
which he says he accepted under protest. The property was sold by
public auction
nearly three years later, on 18 June 2015. The
successful bidders were the applicant’s sister and one Ryan
Naidoo, whose
wife was the sole member of the close corporation in
liquidation. That agreement was cancelled on 16 September 2015 due to
a failure
by the purchasers to comply with their obligations. On 3
November 2015 the property was again sold by public auction. During
the
confirmation period a higher offer was accepted by the
liquidators and the property was sold by private treaty. On 3
November 2015
the applicant instituted an action in this court in
which he seeks an order for the transfer of the property to him,
against a
tender to perform all his obligations as purchaser in terms
of the agreement of 5 June 2012. On 23 November 2015 he launched an
application to interdict the transfer of the property pending the
final determination of the action to which I have referred, and
a
rule nisi together with an interim interdict was granted on that day.
The matter then came before me on the opposed roll, with
the
applicant seeking confirmation of the rule nisi and the respondents
its discharge.
[5]
Counsel for the applicant submitted that because he seeks an
interdict
pendente lite
the test is whether the applicant has
shown a
prima facie
right, though open to some doubt, and
whether the balance of convenience favours him. There are no material
disputes of fact on
the papers and the matter is essentially one of
law. I deal firstly with the issue relating to the validity of the
agreement.
[6]
In terms of section 2(1) of the Alienation of Land Act
[1]
no alienation of land shall be of any force or effect unless it is
contained in a deed of alienation signed by the parties
thereto or by
their agents acting on their written authority. It is by now trite
that corporate entities, being unable to act other
than through
natural persons, cannot give written authority to their
representatives, and that therefore the written-authority
requirement
does not apply when a functionary of a company signs a contract
for the sale of land.
[2]
It was
held in
Northview
[3]
that the principle also
applies to close corporations and that a member, authorised as such
to sign, does not require written authority
to sign such a contract.
Where a member however authorises a third person to enter into such a
contract the authorisation must
be in writing.
[4]
[7]
In the present matter the agreement was not signed by a member of the
close corporation, but by two of the three liquidators.
Counsel
submitted that section 2(1) nevertheless finds no application as the
liquidators were not agents as contemplated in the
section and their
actions were those of the close corporation. This seems to me to be
correct. It has been held that when a liquidator
performs the
functions of the former board of directors his acts are the acts of
the company.
[5]
And in
AMS
Marketing
[6]
the court referred with approval to
Gower
[7]
who
says when a liquidator concludes a contract he does so on behalf of
the company. It follows that when there is only one liquidator
he
does not need written authority to sign a contract for the sale of
land as he is in the same position as a duly authorised functionary
of the company. If one of several liquidators signs such a contract
the only question is whether he was authorised to do so, as
in the
case of a functionary of a company.
[8]
In terms of section 282 of the Companies Act of 1973 liquidators are
required to act jointly in performing their functions.
The
third respondent was appointed as a joint liquidator the day before
the other two signed the agreement. It is not disputed
that he had
not authorised them to do so. Counsel for the applicant submitted
that as a matter of probability he must have become
aware of the
agreement and ratified it. But there is no evidence that he did. And
if he became aware of the agreement there is
no evidence that he knew
it required to be ratified. It would appear that none of the
liquidators realised at the time that when
the first and second
respondents signed the agreement the third respondent had already
been appointed. In any event, the effect
of the third respondent’s
affidavit, read with the answering affidavit deposed to by the fourth
respondent, is that he did
not authorise the conclusion of the
agreement, nor did he ratify it. There is nothing on the papers to
gainsay this, and it must
of course be born in mind that the
agreement was not in existence for long as it was cancelled on 16
August 2012. It follows in
my view that the agreement of 5 June 2012
was invalid as the two liquidators who signed it could not bind the
close corporation
without the authority of the third liquidator.
[9]
I deal briefly with the two alternative points relied on by the
liquidators. The first is that even if the agreement was validly
concluded it was later cancelled as a result of a breach by the
applicant of his obligations. Counsel for the applicant accepted
in
argument that the applicant was in breach and that the cancellation
would have been proper if it was duly authorised. It appears
from the
papers that it was only authorised by the two liquidators who had
signed the agreement, and not by the third respondent.
Their answer
to this is that the cancellation was ratified by the third
respondent, who signed the subsequent sale agreement together
with
the other liquidators. Counsel for the applicant contested this on
the basis that he may not even have known of the cancellation.
This
is a double-edged sword for the applicant. If the sale to the
applicant did not come to the notice of the third respondent
then he
could not have ratified it. If it did come to his notice then it is
inherently improbable that he would have co-signed
a new agreement
without knowledge of the cancellation of the first agreement. And if
he signed the new agreement with knowledge
of the cancellation of the
first one then he ratified the cancellation. It seems to me that if
the agreement on which the applicant
relies was validly concluded
then its subsequent cancellation was valid.
[10]
The second alternative point relates to prescription. The liquidators
contend that any claim that the applicant may have had
for transfer
was extinguished by prescription. They say the letter of cancellation
was sent to him on 16 August 2012, and any claim
he may have had for
transfer arose not later than the date on which he received that
letter. His summons was issued on 3 November
2015. He does not
dispute that this was more than three years after his claim arose.
The only basis on which he contends that his
claim has not prescribed
is that the fourth respondent told him that the liquidators would not
rely on the breach notice and acknowledged
their obligation to
transfer the property to him. She disputes this and says she in any
event had no authority to speak for the
liquidators as she was only
asked to perform certain administrative tasks. It is true that in his
affidavit the applicant refers
to the fourth respondent as the agent
of the liquidators. That does not constitute evidence that she was
their agent or authorised
to bind them, and there is no other
evidence that she was. It follows in my view that any claim which the
applicant may have had
for transfer of the property was extinguished
by prescription.
[11]
The applicant has in my view not made out a
prima
facie
case, not even one open to some
doubt. It seems plain that the agreement on which he relies was
invalid for want of authority,
was in any event cancelled because he
failed to comply with his obligations, and he waited longer than the
prescriptive period
to try and enforce his claim for transfer.
[12]
The rule nisi is discharged with costs, including those reserved on
23 November and 8 December 2015 and those occasioned by
the
employment of senior counsel
.
PLOOS
VAN AMSTEL J
Appearances:
For
the Applicant : Adv. M Pillemer SC
Instructed
by : Franke and Associates Attorneys
Durban
For
the Respondents : Adv. A Stokes SC
Instructed
by : Johnston and Partners
Durban
Date
of Hearing :22 March 2016
Date
of Judgment : 20 April 2016
[1]
Alienation
of Land Act 68 of 1981
.
[2]
Northview
Shopping Centre (Pty) Ltd v Revelas Properties Johannesburg CC And
Another
2010 (3) SA 630
(SCA) para 6.
[3]
Para
11.
[4]
Para
25.
[5]
Barclays
Zimbabwe Nominees (PVT) Ltd v Black
1980 (4) SA 720
(AD) at 726B;
Howat Motors (Pty) Ltd v Waterson
1963 (3) SA 669
(TPD) at
672H-673C;
[6]
AMS
Marketing Co v Holzman And Another
1983 (3) SA 263
(WLD) at 268E.
[7]
Gower,
Principles of Modern Company Law 4
th
ed at 726.