About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: North Gauteng High Court, Pretoria
SAFLII
>>
Databases
>>
South Africa: North Gauteng High Court, Pretoria
>>
2014
>>
[2014] ZAGPPHC 113
|
|
Hartbees Brick Works (Pty) Ltd v Szamosvari (1S256/2012) [2014] ZAGPPHC 113 (14 March 2014)
IN THE NORTH
GAUTENG HIGH COURT, PRETORIA
(REPUBLIC OF
SOUTH AFRICA)
Case
No: 1S256/2012
DATE:
14 MARCH 2014
In the matter
between:
HARTBEES BRICK
WORKS (PTY) LTD
.............................................
Plaintiff
And
SZAMOSVARl D
S
..........................................................................
Respondent
JUDGMENT
JANSE VAN
NIEUWENHUIZEN J
[1] In terms of a
written sale agreement concluded on 21 February 2012, the plaintiff,
a private company, sold its brick-making
business to the defendant.
[2] Although the
defendant took possession of the business, he failed to make payment
of the total purchase price in the amounts
and on the times agreed
upon between the parties.
[3] As a result, the
plaintiff instituted the present action, claiming payment of an
amount of R 800 000, 00 and certain ancillary
relief.
[4] The defendant
has raised three special pleas and I was informed at the inception of
the trail that, by agreement between the
parties, only the second
special plea will proceed.
[5] I consequently
granted an order separating the issues pertaining to the second
special plea from the remainder of the issues
between the parties.
AMENDMENT
[6] After evidence
and closing argument pertaining to the special plea was finalised, I
reserved judgment in order to afford the
parties an opportunity to
file further heads of argument.
[7] With its heads
of argument and on 29 January 2014, the plaintiff filed an
application of intention to amend its reply, which
application was
opposed by the defendant. The subsequent application to amend was
argued on 25 February 2014 and I reserved judgment
in the
application. I will deal with the merits of the application in due
course.
SECOND SPECIAL
PLEA: SECTION 228 OF THE COMPANIES ACT, 61 OF 1973
[8] The provisions
of the, now repealed, Companies Act 16 of 1973, is applicable to the
dispute and the Act will herein after be
referred to as the 1973 Act.
For
purposes of the
special plea, it is common cause between the parties that the sale of
the plaintiffs brick-making business constitutes
a sale of the whole
or the greater part of the undertaking of the plaintiff alternatively
the whole or greater part of the assets
of the plaintiff.
[9] In the aforesaid
circumstances, the provisions of section 228 of the Act applies. The
provisions read as follows:
“(1)
Notwithstanding anything contained in its memorandum or articles, the
directors of a company shall not have the power,
save by special
resolution of its members, to dispose of-
(a) The whole or
greater part of the undertaking of the company; or
(b) The whole or
greater part of the assets of the company.
(2)
(3) A special
resolution of a company shall not be effective in approving a
disposal described of in subsection (1) or (2) unless
it authorises
or ratifies in terms of the specific transaction. ”
[10] Ms Dreyer,
counsel for the defendant, submitted that compliance with the
provisions of section 228 is, in itself, not sufficient.
In support
of the aforesaid submission, she stated the following in her heads of
argument:
"6. special
resolution so passed:
6.1 must be
registered with the Registrar of Companies within one month of the
passing of the special resolution; [section 200]
6.2 which is not
lodged with the registrar in register within six months from the date
of the passing of the resolution shall lapse
and be void;
[section 202]
6.3 shall not take
effect until it has been registered by the registrar.
[section 203]"
[11] It is clear
from the pleadings and the evidence of Mr. Lau, who testified on
behalf of the plaintiff, that the plaintiff did
not comply with the
provisions of section 228.
[12] Although it was
at all relevant times the plaintiffs stance that the plaintiff did
not need to comply with the provisions of
section 228 due to the fact
that Mr Lau is the sole shareholder and director of the plaintiff,
the plaintiff sought to amend its
. reply to include an alternative
to its aforesaid position.
[13] In paragraph 5
of the defendant's plea, the defendant averred that the sale
agreement is not enforceable in law and in the
subsequent paragraphs
he deals with the requirements of section 22 were which not complied
with.
[14] The proposed
amendment of the plaintiff’s its reply to the aforesaid
averments reads as follows:
"5.1 The
content of this paragraph is denied and the Defendant is put to the
proof thereof.
5.2 In the event
that the Honourable Court may find that the Sale Agreement is not
enforceable at law, which is still denied, then
and in that event the
plaintiff pleads that on or about 21 January 2014 and at or near
Pretoria, a special resolution, authorizing
and ratifying the Sale
Agreement between the Parties, was adopted by the Plaintiff. A copy
of the resolution is attached hereto
and marked ANNEXURE "PA1"."
[15] Mr Carstensen,
counsel for the defendant in the application to amend, submitted that
the proposed amendment will have no legal
effect and should for this
reason alone be dismissed.
[16] His submission
is premised on the following:
i) the plaintiff
does not aver that the special resolution has been registered by the
Registrar as envisaged in section 200 of the
Act;
ii) section 203 of
the Act provides that a special resolution is not effective until it
had been registered by the Registrar in
terms of section 200;
iii) consequently
the proposed amendment to the plaintiffs reply will not cure its
non-compliance with the Act and has no effect.
[17] I agree and
consequently the plaintiffs application to amend its reply cannot
succeed.
EVIDENCE
[18] Mr Lau was the
only witness on behalf of the plaintiff.
[19] He testified
that, although he is the sole shareholder and director of the
plaintiff, ■ his wife, Laura Lau, run the
plaintiffs brick
making business. He was approached by the defendant, who indicated
that he wishes to purchase the brick making
business.
[20] During January
2011 he had a meeting with his attorney, at which meeting both his
wife and the defendant was present.
[21] Subsequent to
the meeting, he signed a document titled "Special resolution"
at the offices of his attorney. The document
was signed to enable Mrs
Lau to conclude the negotiations and enter into a written agreement
with the defendant.
[22] The document
reads as follows:
"I, CHUN KAU
LAU (ID: 6………………..), as a
director of HARTEBEES BRICK WORKS, gives Mrs
YUE GUI LAU (ID:
7…………….) permission and mandate to
Sell HARTEBEES BRICK WORKS and sign all
the necessary documentations.
You can contact me
directly if you have any enquiry."
[23] Mr Lau signed
the document in his capacity as director of the plaintiff.
[24] The document
was not registered with the Registrar of Companies.
LEGAL POSITION
[25] It is clear
that the plaintiff did not comply strictly with the provisions of the
Act.
[26] The question
then arises whether the steps taken by the plaintiff satisfy the
purpose of section 223 of the Act.
SUBSTANTIAL
COMPLIANCE
[27] In Weenen
Transitional Local Council \/ Van Dyk
2002 (4) SA 653
SCA, Olivier JA
dealt with the issue of substantial compliance of a provision of an
Act and held as follows at 659B-F:
"It seems to me
that the correct approach to the objection that the appellant had
failed to comply with the requirements of
s 166 of the ordinance is
to follow a common-sense approach by asking the question whether the
steps taken by the local authority
were effective to bring about the
exigibility of the claim measured against the intention of the
legislature as ascertained from
the language, scope and purpose of
the enactment as a whole and the statutory requirements in particular
(see Nkisimane and Others
v Santam Insurance Co Ltd
1978 (2) SA 4
30
(A) at 434A-B). "
[28] It is of
importance to determine which legal interests an enactment achieves
to protect. This much was confirmed by Trollip
J in Du Preez and
Another v Garber: In Re Die Boerebank Bpk
1963 (1) SA 806
W at 814
D-F
"As in the
present case the opposing creditors have strenuously contended that
those formalities were not fully complied with
in several respects,
it is necessary, I think, to affirm at the outset that the Court will
not insist upon absolute or meticulous
observance of all those terms
and requirements, but will generally act on a substantial compliance
therewith, if no prejudice or
possible prejudice to anyone's legal
interests has resulted from the non-observance of the prescribed
formalities."
[29] In the
premises, it is necessary to determine whose legal interests section
228 read with section 203 seek to protect.
[30] In Stand 242
Hendrik Potgieter Road Ruimsig (Pty) Ltd and Another v Gobel NO and
Others
2011 (5) SA 1
SCA, Lewis JA dealt with the person/s legal
interest, section 228 aims to protect and held a follows as para
[13]:
"Section 228
(and s 70dec(2) of the Companies Act 46 of 1926, which was in the
same terms) was introduced for the protection
of shareholders who
have given general control of the company to its directors. It is the
shareholders themselves who should exercise
control over the disposal
of the company's major assets." and at para [14]:
"Van Zyl J said
that there was no indication that 'that the public interest or public
policy played any part in the intention
of the Legislature when it
enacted s
228'. "Accordingly
there w/as no reason why a party to a contract, in good faith, need
be adversely affected should the company's
internal procedures not be
followed." [Also see: Simcha Properties 6 CC v San Marcus
Properties (Pty) Ltd
[2011] 1 All SA 287
SCA]
[31] It is clear
that Mr Lau, as sole shareholder of the plaintiff, was fully aware of
the sale of the plaintiffs assets. To this
end, Mrs Lau was
specifically mandated to conclude the sale with the defendant.
[32] The defendant
has not been prejudiced by the plaintiff's failure to observe the
exact provisions of section 228 and the intention
of the legislature
in enacting
section 228, i.e. to
protect shareholders' interests, has substantially been complied
with.
[33] This submission
cannot be upheld in view of the express finding in Stand 242 Hendrik
Potgieter Road fcuimsig (Pty) Ltd and
Another v Gobel NO and Others,
* ,
supra.
[34] Ms Dreyer
submitted that the plaintiffs failure to register the "special
resolution" is fatal, in that the failure
prejudiced the
creditors of the plaintiff. According to Ms Dreyer, creditors have
the right to know that a company has disposed
of the greater part of
its undertaking or assets.
[35] In the
premises, the defendant’s second special plea cannot succeed
ORDER:
I make the following
order:
1. The plaintiffs
application to amendment is dismissed with costs.
2. The defendant's
second special plea is dismissed with costs.
VAN NIEUWENHUIZEN
JUDGE OF THE
GAUTENG DIVISION PRETORIA
Applicant’s
counsel: Adv H Greef
Respondent’s
counsel: Ludick Attorneys
558 Deneyssen
Avenue Mountain View Pretoria
Respondent’s
attorneys: Adv C J Dreyer
and Adv
Carstensen
Respondent’s
counsel: Hutcheon Attorneys
c/o Van Stade van
der ende Menlyn Square East Block Menlyn Pretoria