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[2015] ZAGPPHC 626
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Body Corporate Georgian Terrace v Sananga Business Enterprise CC and Others (69125/2014) [2015] ZAGPPHC 626 (21 August 2015)
IN THE HIGH COURT OF SOUTH AFRICA
(GAUTENG DIVISION, PRETORIA)
Case number: 69125/2014
Date: 21/08/2015
In
the matter between:
THE BODY CORPORATE GEORGIAN
TERRACE APPLICANT
And
SANANGA BUSINESS ENTERPRISE CC
Registration number
2004/020256/23 1
ST
RESPONDENT
STANDARD BANK OF SOUTH AFRICA
LTD 2
ND
RESPONDENT
REGISTRAR OF
DEEDS 3
RD
RESPONDENT
COMPANIES AND INTELLECTUAL PROPERTY
COMMISSION 4
TH
RESPONDENT
GALAL,
AMIT 5
TH
RESPONDENT
GALAL,
USHMA 6
TH
RESPONDENT
MTHOMBENI,
ERIC 7
TH
RESPONDENT
NESANE, NDIVHUDZANNYI
MICHAEL 8
TH
RESPONDENT
THE MINISTER OF
FINANCE 9
TH
RESPONDENT
JUDGMENT
PRETORIUS
J,
INTRODUCTION:
[1]
This
is in essence an application for the reinstatement of the
registration of a formerly deregistered close corporation, in terms
of
section 82(4)
of the
Companies
Act, 71 of 2008
.
The court has to decide whether the reinstatement operates
retrospectively from the date of its deregistration, so as to
validate actions performed on behalf of the close corporation during
the period of deregistration.
[2]
The
second question this court has to deal with is whether the court has
the power under
section 83(4)
of the Act to render the reinstatement
of the close corporation retrospective to the extent that it is just
and equitable and to
proceed to exercise the power in favour of the
applicant. The 5
th
and 6
th
respondents launched a counter application requesting an order in the
following terms:
“
That it be declared that the sale in
execution held on 14 February 2012 in terms whereof the 5
th
and 6
th
respondents purchased the property known as
Section 2
as shown and
more fully described on Sectional Plan No
SS372/2005
in the scheme
known as the Georgian Terrace, situate at Edenburg Township, The City
of Johannesburg, Held by Deed of Transfer No:
ST6882/200, is
void ab initio”
Sananga Business Enterprise CC, a close corporation registered as
such with registration number 2004/020256/23, the first respondent,
was finally deregistered by the fourth respondent for failure to
submit annual returns on 24 February 2011.
[3]
Prior
to deregistration on 24 February 2011 the applicant obtained judgment
against the first respondent, which ultimately lead
to execution and
the sale in execution of the first respondent’s immovable
property, a sectional title unit in the scheme
known as Georgian
Terrace, situated at Edenburg Township. The first respondent
applied for rescission of judgment on two
occasions, but was
unsuccessful. The second respondent is Standard Bank of South
Africa Ltd, as the mortgagee of the property;
the third respondent is
the Registrar of Deeds; the fourth respondent is the Companies and
Intellectual Property Commission - the
fourth respondent is required
to restore the registration of the first respondent. The fifth
and sixth respondents were the
purchasers of the property at the sale
in execution. The seventh and eighth respondents are the only
active members of the
first respondent according to the CIPC report.
The ninth respondent is the Minister of Finance and is cited as the
property
in issue is
bona
vacantia
at present.
[4]
This
application is only opposed by the fifth and sixth respondents.
BACKGROUND:
[5]
During
June 2010 the applicant claimed in an action for arrear levies and
related charges levied by the applicant due to the first
respondent’s
ownership of the property. Default judgment was granted and
warrants of execution against both the movable
and immovable property
were granted. The first respondent was renting out the property
at the time.
[6]
The
property was sold in execution to the fifth and sixth respondents for
R960 000.00 on 14 February 2012. There is currently
a case
pending in the Gauteng Local Division of the High Court wherein the
court has been requested by the fifth and sixth respondents
to cancel
the sale in execution.
[7]
The
judgment against the first respondent was granted on 27 August 2010,
prior to the deregistration of the first respondent on
24 February
2011, approximately a year prior to the sale in execution.
THE LAW:
[8]
Section
83(4)
of the
Companies Act provides
:
“
At any time after a company has been
dissolved-
(a)
the
liquidator of the company, or other person with an interest in the
company, may apply to a court for an order declaring the
dissolution
to have been void, or any other order that is just and equitable in
the circumstances; and
(b)
if
the court declares the dissolution to have been void, any proceedings
may be taken against the company as might have been taken
if the
company had not been dissolved.”
[9]
The
applicant submits that it will be just and equitable to grant an
order as requested by the applicant as required in terms of
section
83(4).
[10]
According
to the applicant, should the first respondent remain in
deregistration, it will prejudice the applicant severely as the
property vests
bona
vacantia
in the state and the applicant is unable to recover the mounting
arrears and levies owing by the first respondent. The process
of execution will be undone in the event that the deregistration
remains in perpetuity. The applicant will also be unable
to
seek satisfaction of the judgment obtained against the first
respondent.
[11]
The
members of the applicant, who are individual owners of units of the
sectional title complex are liable to the municipality for
rates and
taxes, as well as for all the other costs occasioned by the day to
day operation of the complex.
[12]
The
first time the applicant had knowledge of the deregistration of the
first respondent was on 9 May 2014 when the fifth and sixth
respondents informed the applicant by letter that the first
respondent had been deregistered on 24 February 2011.
[13]
The
applicant requests the court to grant the relief claimed
retrospectively to prevent the sale in execution falling away, which
would result in further legal costs. The applicant is a
section
21
company, which relies exclusively on the levies imposed on the
members of the complex. The fifth and sixth respondents
purchased
the property at a public auction on 14 February 2012, which
was approximately one year after the final deregistration of the
first
respondent.
[14]
The
fifth and sixth respondents raised as a point
in
limine
that
reinstatement would re-establish the first respondent’s
corporate personality and ownership of property, but would not
validate its acts during the period of deregistration.
According to the fifth and sixth respondent, reinstatement has
prospective
effect only and no retrospective effect.
[15]
The
second point
in
limine
is a complaint that the applicant failed to join the Minister of
Rural Development and Land Reform as this department controls
all
immovable property owned by the state. Furthermore the fifth
and sixth respondents contend that the sheriff of the Magistrate’s
Court Sandton – Midrand should have been joined as the sheriff
presided over the sale in execution of the property.
[16]
The
third point
in
limine
dealt with the order to declare the sale in execution of the property
lawful. The complaint by the fifth and sixth respondents
is
that there is no proof that the correct process prior to the sale in
execution was followed.
[17]
It
is clear that the fifth and sixth respondents only oppose prayers 7,
8 and 9 of the notice of motion. The 5
th
and 6th respondents have another application pending between them and
the first respondent in the Gauteng Local Division.
The
respondents, as purchasers at a sale in execution, seek the setting
aside of the sale under case number 41044/2012 in the Gauteng
Local
Division. In the present application, the fifth and sixth
respondents seek, in substance, the same relief as that claimed
in
the main application in the Gauteng Local Division. In the
present counter-application they seek that the sale in execution
concluded on 14 February 2012 be declared void, whilst in the
application instituted in the Gauteng Local Division they seek
cancellation
of the sale based on the deregistration of the closed
corporation. Therefore the deregistration defence is
lis
alibi pendens
in the Guateng Local Division and if I deal with the
counter-application as there is a pending application in the Gauteng
Local
Division, the pending application in the Gauteng Local Division
will be of academic value only.
[18]
The
applicant submits that the relief claimed in relation to the
execution process post deregistration is aimed exclusively at
negating the deregistration and its effect in terms of
section 83(4)
of the
Companies Act. There
is no reason for this court to come
to the decision that the execution process was flawed, as alleged by
the fifth and sixth respondents
as there is no such evidence.
In any event the court has not been requested to decide on the
process leading to the execution
or the execution process as such.
This point
in
limine
must thus be dismissed.
[19]
The
further point
in
limine
relates to the non-joinder of the Minister of Rural Development and
Land Reform. The Minister of Finance had been cited as
the
ninth respondent. In
Newlands
Surgical Clinic (Pty) Ltd and Peninsula Eye Clinic (Pty) Ltd and
Others 2014(1) SA 381 (WCC)
the court found at para 12:
“
The
Minister of Finance was joined because it is a well-established
principle in our law that the property of a dissolved company
goes as
bona vacantia to the state
;
see Rainbow Diamonds (Edms) Bpk en Andere v Suid-Afrikaanse Nasionale
Lewensassuransiemaatskappy 1984(3) SA 1 (A) at 10 –
12.
In
consequence it became a standard requirement that the Minister of
Finance, as the Minister responsible for the Treasury, be joined
in
any application to a court for reversal of the dissolution of a
company by re-registration
(see Rainbow Diamonds (Edms) Bpk at 14F-H).”
(Court’s
emphasis)
[20]
This
decision was overturned by the Supreme Court of Appeal, but the above
dicta
was not changed and confirmed the decision of
Rainbow
Diamonds (Edms) Bpk en Andere v Suid-Afrikaanse Nasionale
Lewensassuransiemaatskappy 1984(3) SA 1 (A)
.
[21]
The
ninth respondent did not file a notice of intention to oppose.
The question of non-joinder of the sheriff is a non-issue,
as the
sheriff has no legal interest in the outcome of this application.
The sheriff had received the deposit for the sale
in execution and
his rights will not be affected in any manner whatsoever. This
point
in
limine
is similarly dismissed. I find that the Minister of Finance was
correctly cited in this matter.
[22]
The
fifth and sixth respondent’s counsel argued that there is a
distinction between the word “dissolved” and the
word
“deregistered”.
[23]
Section
83(1)
of the
Companies
Act
provides
:
“
A company is dissolved as of the date
its name is removed from the companies register unless the reason for
the removal is that
the company’s registration has been
transferred to a foreign jurisdiction, as contemplated in
section
82(5).
”
[24]
In
ABSA
Bank Ltd v Companies and Intellectual Property Commission and Others
2013(4) SA 194 (WCC)
the court held at para 52:
“
In my opinion,
s 83(4)
applies in all
cases where a company or corporation’s name has been removed
from the register in terms of part G of ch 2
and where the company or
corporation has as a result been dissolved
.
This includes deregistration on any of the grounds set out in
s
82(3).
Where a company or corporation has been deregistered by
the CIPC in terms of
s 82(3)
rather than in terms of
s 82(2)(b)
, an
interested party may either apply to the CIPC for restoration in
terms of
s 82(4)
or to the court in terms of
s 83(4).
Particularly where the interested party finds it impossible or
practically difficult to comply with the prescribed requirements
relating to restoration in terms of
s 82(4)
, an application to court
in terms of
s 83(4)
is available as an alternative.”
[25]
In
Missouri
Trading CC and Another v ABSA Bank Ltd and Others 2014(4) SA 55 (KZD)
Koen J held at para 33:
“
The position in our law regarding
reversing the dissolution of a close corporation appears to be as
follows:
(a)
When
a corporation is deregistered by its name being removed from the
register for whatever reason, it is ‘dissolved’
for the
purpose of
section 83(1).
”
[26]
I
fully agree with the principles enunciated in these
dicta
and this so-called distinction does not exist. This point by
the fifth and sixth respondents is dismissed.
[27]
In
Newlands
Surgical Clinic (Pty) Ltd v Peninsula Eye Clinic (Pty) Ltd 2015(4) SA
34 (SCA)
the court dealt extensively with the question relating to the
retrospective effect of the reinstatement of a company or a closed
corporation. The court held that at the deregistration an end
is put to the existence of a company and all subsequent actions
are
void and of no effect. In this matter of
Newlands
Surgical Clinic
(
supra
)
the court found that the respondent would be severely prejudiced at
reinstatement if it was concluded that non-retrospectivity
existed.
[28]
The
main fact which should be considered is whether retrospectivity will
prejudice third parties as recognised in
Insamcor
(Pty) Ltd v Dorbyl Light and General Engineering (Pty) Ltd, Dorbyl
Light and General Engineering (Pty) Ltd v Insamcor (Pty)
Ltd 2007(4)
SA 467 (SCA); CA Focus CC v Villange 2013(6) SA 549 and Kadoman
Trading 15 (Pty) Ltd v Noble Crest CC 2013(3) SA 338
(SCA)
.
[29]
Brand
JA held in
Newlands
Surgical Clinic
(
supra
)
at para 26:
“
But,
more significantly in my view, is the consideration that refusal to
validate the corporate activities of a company during its
period of
demise
can
be equally devastating to the interests of bona fide third parties
who were unaware of the deregistration
.
That much is well-illustrated by the facts of this case and by Absa
Bank Ltd v Companies and Intellectual Property Commission
and others
2013(4) SA 194 (WCC). The truth is that deregistration of a
company bears that inherent risk. It results
from the fact that
a comparison between the deregistration of a company, on the one
hand, and the death of a person, on the other,
is not entirely
correct. Unlike a deceased person, a deregistered company
often, as in this case, carries on with its business
as if the
deregistration never occurred and with third parties having no
knowledge of its disability. Indiscriminate validation
of
corporate activities, on the one hand, and the indiscriminate refusal
to validate these activities, on the other, therefore
cut both ways.
Potential
prejudice to third parties therefore affords no reason to interpret
s
82(4)
so as to exclude retrospective validation in principle
.”
(Court’s
emphasis)
[30]
And
in para 29:
“
The
only meaning available on that wording, as I see it, is that
s 82(4)
has automatic retrospective effect, not only in revesting the company
with its property but also in validating its corporate activities
during the period of its deregistration
.
In short, there is no textual basis to distinguish between revesting
of property and revesting the company with the capacity
to continue
operating.”
(Court’s
emphasis)
[31]
Counsel
for the fifth and sixth respondents argued that selling a property in
execution cannot be regarded as “
corporate
activities
”.
The sale in execution took place as result of a court order. I
find that “corporate activities”
do include the process
of launching an application to claim arrear levies and the subsequent
court order leading to the sale in
execution.
[32]
I
find in the present instance that should the first respondent not be
reinstated in terms of
section 83(4)
of the Act, it will not be “
just
and equitable in the circumstances”
as provided for in
section 83(4)
of the Act. This applies even
more so in this instance where none of the other respondents are
opposing this application.
[33]
I
cannot find that the fifth and sixth respondents will be prejudiced,
as they had bought the property and for some unknown reason
is no
longer satisfied with their purchase. In the
ABSA
case
(
supra
)
at para 57, the position as to the deregistration of close
corporations in terms of the Act was dealt with as follows:
“
In
order to avoid absurd and unjust results, it is necessary to
interpret
s 83(4)
as applying, inter alia, to any company whose
existence came to an end by deregistration or dissolution under the
1973
Companies Act (other
, of course, than a company wound up as
insolvent, in which case
s 420
of the old Act continues to apply).
A company so deregistered or dissolved under the old Act can properly
be described as
one which was ‘dissolved’ for purposes of
s 83(4).
In particular, removal from the register in terms of
s
73
brought the company’s existence to an end (Miller and Others
v Nafcoc Investment Holding Co Ltd and Others 2010(6) SA 390
(SCA)
para 11).
The
word ‘dissolution’ as applied to a company conveys in its
ordinary meaning the termination of the company’s
existence.
The same is true for a corporation by virtue of
s 26
of the amended
CC Act read with s 83(4)
.”
(Court’s
emphasis)
[34]
In
the
Peninsula
case
(
supra
)
the court held at para 50:
“
The
ambit of s 83(4) is wide enough to empower a court to deal not only
with the validation, conditionally or otherwise, of corporate
activity purportedly conducted on behalf of the company during its
period of deregistration, but also, if it is just and equitable
to do
so, with any prejudicial consequences of the ordinarily retrospective
effects of reinstatement, viz the re-establishment
of reconstitution
of the company’s board of directors and general body of
members.
The
wide breadth of the court’s power in terms of the second
category of remedy affords the ability to make the effect of
any
restoration of the company retrospective, whether generally or
selectively
.”
(Court’s
emphasis)
[35]
I
have carefully considered all the facts, arguments and authorities.
I come to the conclusion that the appellant has shown
on a
balance of probabilities that the reinstatement of the first
respondent should be granted with retrospective effect and the
first
respondent is restored in terms of
section 83(4)
of the
Companies
Act, 71 of 2008
. Therefor the actions and corporate activities
by the close corporation during deregistration are validated.
This includes
the sale in execution to the fifth and sixth
respondents.
[36]
In
the result I make the following order:
1.
The
registration of the first respondent known as Sananga Business
Enterprise CC with Registration No: 2004/020256/23, is
restored
in terms of section 26 of the Close Corporations Act as amended, read
with
section 83(4)
of the
Companies Act 71 of 2008
;
2.
The
fourth respondent is to restore/re-enter the first respondent’s
name to the Register of Close Corporations;
3.
The
order granted in paragraph 1 and 2 above is not subject to compliance
with
Regulation 40(6)
of the Regulations promulgated under the
Companies Act 71 of 2008
.
4.
All
the assets of the first respondent immediately prior to its
dissolution/deregistration on 24 February 2011, and in particular
the
first respondent’s immovable property as described hereunder,
is declared to be no longer
bona
vacantia
and is declared to re-vest in the first respondent, the immovable
property in question being:
Section 2
as shown and more fully described on Sectional Plan no
SS372/2005
, in the scheme known as Edenburg Township, City of
Johannesburg, of which section the floor area according to the said
sectional
title plan is 100 square metres in extent, together with an
undivided share in the common property in the scheme apportioned to
the said section in accordance with the participation quota as
endorsed in the said sectional plan, held by deed of transfer
ST6882/2008,
and an exclusive use area described as garden G2
measuring 51 square metres, being such portion of the common property
comprising
the land and scheme known as Georgian Terrace in respect
of the land and building or buildings situated at Edenburg Township,
City
of Johannesburg, as shown and more fully described on Sectional
Plan no
SS372/2005
held by Notarial Deed of Cession no SK 5832/2008S
(“the property”).
5.
The
liabilities of the first respondent immediately prior to its
dissolution/deregistration on 24 February 2011 is declared to re-vest
in the first respondent;
6.
The
sale in execution of the property, held on 14 February 2012, and all
steps taken pursuant thereto, is declared valid and enforceable,
insofar as, and to the extent that such sale and steps taken pursuant
thereto, was concluded/taken during the period of the first
respondent’s period of dissolution;
7.
It
is declared that the reinstatement of the first respondent as a close
corporation in terms of
section 83(4)
of the
Companies Act has
retrospective effect from the date of deregistration which includes
the retrospective validation of its corporate activities during
that
period. All acts done by or against the first respondent from
the date of this dissolution/deregistration until the
date of its
restoration were validly done and that those acts are of full force
and effect.
8.
Insofar
as the first respondent’s corporate personality and title to
its property is concerned, this order has retrospective
effect from
the date upon which the first respondent was dissolved/deregistered,
so that the property that was vested in it at
the date of its
dissolution/deregistration is deemed to have remained as its property
as if it had not been dissolved/deregistered.
9.
The
fifth and sixth respondents are ordered to pay the costs of the
application.
10.
The
counter-application is dismissed with costs.
_____________________
Judge C Pretorius
Case number
: 69125/2014
Matter heard on
: 5 August 2015
For the Applicant
: Adv C van der Merwe
Instructed by
: Witz, Calicchio, Isakow and Shapiro
Attorneys
For the Respondents
: Adv AP Ellis
Instructed by
: Rahman & Rahman Incorporated
Date of Judgment
: 21/08/2015