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[2013] ZAGPPHC 198
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Barloworld Logistics Africa (Pty) Ltd v Silvertron 481 CC and Others (48248/2010) [2013] ZAGPPHC 198 (15 July 2013)
NOT
REPORTABLE
IN
THE NORTH GAUTENG HIGH COURT – PRETORIA
(REPUBLIC
OF SOUTH AFRICA)
CASE
NO: 48248/2010
DATE:15/07/2013
In
the matter between:
BARLOWORLD
LOGISTICS AFRICA (PTY)
LTD
............................................
APPLICANT
and
SILVERTRON
481
CC
................................................................................
1
st
RESPONDENT
GEORGE
MCDONALD
.............................................................................
2
nd
RESPONDENT
WILLEM
HENDRIK VILJOEN
ERASMUS.
...............................................
3
rd
RESPONDENT
JUDGMENT
N Y
KHUMALO AJ
INTRODUCTION
[1]
Applicant is suing Silvetron 481 CC, a duly incorporated close
corporation (“1
st
Respondent”) and or the 2
nd
and 3
rd
Respondents for payment of a sum of R399 133.85
plus interest payable thereon for shipment and ancillary services
that Applicant
alleges to have rendered to 1
st
Respondent,
at its special instance and request during the period June 2007 to
May 2008.
[2]
The 2
nd
Respondent George Mcdonald and 3
rd
Respondent, Willem Hendrik Erasmus, are being sued in their personal
capacities in terms of Section 23 of the Close Corporation
Act 69 of
1984 (“The Act”) allegedly as members of the 1
st
Respondent.
[3]
The three Respondents filed a notice to
oppose the Application but the 1
st
and 2
nd
Respondents have since withdrawn their opposition and only 3
rd
Respondent proceeded to file opposing papers.
[4]
Although the issues between the parties,
prima facie seemed simple and easily discernible and the amount
claimed inconsiderable,
the documents filed of record extended into
464 pages, with the heads of argument the Application consisted of a
formidable bundle
of more than 500 pages. Contributing to the paper
trail was a set of lengthy affidavits filed by the Applicant in Reply
and 3
rd
Respondent answering to Applicant’s Reply both raising
additional facts and contentions.
BACKGROUND
FACTS
[5]
A company called ZA Trans Logistics
(Pty) Ltd, (“ZATRANS”) signed a credit facility agreement
that incorporated an Application
submitted by 2
nd
Respondent, granting an entity stated in the agreement as Willie
Erasmus and Medewerkers Trust trading as Silvertron 481 CC (“WEM
Trust”) a credit facility in terms of which ZATRANS was to
provide custom clearing, export and delivery of shipments services
to
1
st
Respondent on credit, subsequent to declining an Application
submitted in the name of the 1
st
Respondent.
[6]
Accordingly, commencing from June 2007
to July 2008 ZATRANS rendered services in terms of the credit
facility to the 1
st
Respondent, issuing monthly statements of account (“invoices”)
to WEM Trust for such services. Payments on the invoices
were made by
1
st
Respondent as well as 3
rd
Respondent, a trustee of Willie Erasmus and Medewerkers Trust (“the
trust”). As at 28 April 2008, an amount of R524
165.00
allegedly remained outstanding.
[7]
In a meeting held on 20 May 2008 by
ZATRANS, 1
st
Respondent and WEM Trust represented by 2
nd
Respondent, the parties agreed that the outstanding amount be reduced
by an amount of R17 884.80. 2
nd
Respondent then informed ZATRANS that the indebtedness was that of
1
st
Respondent not WEM Trust even though the credit facilities were
granted to WEM Trust. Consequently Applicant attached and sold
goods
that were to be shipped on behalf of 1
st
Respondent that it held as a lien and credited the proceeds of R107
146.43 to the debt. The amount owing was allegedly reduced
to R399
133.85 and subsequent a written request by 2
nd
Respondent, ZATRANS amended the invoices to the name of the 1
st
Respondent. The original invoices that were already issued were then
credited to WEM Trust and reissued, debiting 1
st
Respondent with the amounts.
APPLICATION
[8]
Applicant, that is Barloworld Logistics,
is suing for the payment of the outstanding amount citing itself as
‘formerly known
as ZA Trans Logistics (Pty) Ltd’, and as
having granted the credit facilities and agreed to do business with
WEM Trust after
conducting the necessary credit checks and opening an
account in its books in the name of WEM Trust due to 1
st
Respondent not qualifying for such credit facilities.
[9]
In its founding affidavit deposed to by
its financial manager, Wendy Jean Boschetti (“Boschetti”),
Applicant alleges
that;
[9.1]
Following the agreement, it received
written instructions (orders) signed and issued by 2
nd
Respondent to render the services agreed upon at the instance and
request of 1
st
Respondent, without 1
st
Respondent’s registered full name and company registration
number being reflected on the purchase orders as required in terms
of
Section 23 (1) (b) read with Section 23 (2) of the Act as amended.
3
rd
Respondent authorised the orders for the 1
st
Respondent, alternatively the issuing thereof, and expressly or
tacitly by conduct authorised the 1
st
Respondent to order the services from Applicant as alleged. As a
result the 2
nd
and 3
rd
Respondent are liable for the outstanding amount.
[9.2]
There were no objections when the invoices were issued to WEM Trust
for the services that were rendered to 1
st
Respondent
until when 2
nd
Respondent directed that the invoices be
reissued in the name of 1
st
Respondent.
[10]
In response, 3
rd
Respondent, raising the following points in limine, moved for the
Application to fail:
[10.1]
that Applicant has not demonstrated the
necessary locus standi to bring this application due to the absence
of a resolution taken
by the Applicant to institute motion
proceedings against the 2
nd
or 3
rd
Respondents and authorising, Boschetti, to do so.
[10.2]
Applicant, duly incorporated in 1905,
alleges to have been formerly known as ZATRANS, a separate legal
entity with its own registration
number, different and incorporated
in 1996, without attaching any official documents that reflect the
name change from ZATRANS
to the alleged current name of Barloworld
Logistics Africa, therefore failing to make appropriate allegations
in its founding affidavit
to establish its locus standi to sue the
Respondent.
[10.3]
a misjoinder of both the Second and
Third Respondent and non-joinder of the trusts allegedly based on
incorrect assertion by the
Applicant that 2
nd
and 3
rd
Respondent are members of the 1
st
Respondent. On the CIPRO documents attached to Applicant’s
founding affidavit, 2
nd
and 3
rd
Respondents member’s type is indicated as “trust”
and therefore they were not members of the 1
st
Respondent in their personal capacities but as representatives of the
trusts, the Willie Erasmus and Medewerkers Trust and Angel
Investment
Trust, respectively, the actual members of the 1
st
Respondent. He alleges that the trusts should be before court and not
the 2 Respondent and himself,
[11]
Furthermore, 3
rd
Respondent challenges the Application on the ground that the
resolution taken by the Applicant’s board prior to the
institution
of these proceedings confirms that there is a dispute
with regard to the invoicing of the amount of R399 133.85 that was
not resolved
and that Counsel advised the directors to proceed by way
of summons, but Applicant proceeded with an Application even though a
glaring
factual
dispute could be foreseen and failed to make out a case on its papers
and that Applicant has also not complied with the
National Credit Act
34 of 2005
making the application fatally defective, therefore it
should be dismissed with costs.
[12]
Applicant filed a Replying Affidavit
admitting that the resolution that was attached to its Founding
Affidavit was defective and
attached another resolution ratifying the
authority of Boschetti to institute the launched motion proceedings
against the Respondents.
[13]
As proof of its locus standi to sue on
the debt, it attached the latest copy of an outsourcing service
agreement dated 10 October
2007 it allegedly concluded with ZATRANS
that was effective from 1 October 2006 and renewable from time to
time, as well as a sale
of business agreement of its purchase on 10
April 2007 of the business of ZATRANS as a going concern that was
effective from 1
October 2006. It alleges that after the sale and
conclusion of the aforementioned agreements ZATRANS became its
division and the
Respondents were at all material times aware of that
fact. So after the sale the business was concluded by Applicant
through its
ZATRANS division and services therefore rendered to 1
st
Respondent by Applicant as ZATRANS, and so the creditor to which the
1
st
Respondent is indebted was at all material times the Applicant. The
new stationery was then not available hence it used the old
stationery.
[14]
In response to the allegation of
misjoinder and non-joinder Applicant reiterated its assertion that
2
nd
and 3
rd
Respondents were members of the 1
st
Respondent in their personal capacities and attached a copy of the
enquiry it conducted with Kreditinform in support of its allegation,
pointing out that a trust as a member of a CC would be in
contravention of the provisions of s 29 of the Act,.
[15]
As proof that it was not guilty of
reckless lending Applicant attached an Application by WEM Trust for
an increase on the credit
facility during the period of the agreement
and the approval by credit guarantee to increase the cover on such a
facility. It also
confirmed that there were disputes of facts and
implored for the matter to be referred to trial for viva voce
evidence.
[12]
3
rd
Respondent, with Applicant’s consent filed an Answering
Affidavit to the Applicant’s replying affidavit, reiterating
mostly the assertions in his initial affidavit, however also
rejecting that Applicant can, in a replying affidavit remedy its
failure to establish in the founding affidavit the authority of
Boschetti’s to institute the motion proceedings and Applicant’s
legal standing to sue the Respondents.
[13]
He also rejected Applicant’s claim
that one company can be a division of another company and its status
be assumed by the
latter and that Applicant rendered any services to
1
st
Respondent.
[14]
The standpoint on the trust EWMT being
the member of the 1
st
Respondent and not the 2
nd
and 3
rd
Respondent was likewise reiterated and now alleging that the services
were rendered not to the 1
st
Respondent but the trust.
[15]
Even though I was implored to consider
the referral of the matter to trial due to the dispute of facts
alleged to exist. I am of
the view that there are several material
issues that are capable of resolution from the undisputed facts and
the substantiating
documentary evidence that forms part of the
record, the contents of which was undisputed except for the context
and interpretation
imputed to the contents therein, without having to
resort to oral evidence as well as pertinent issues raised in limine,
that required
to be resolved..
AUTHORITY
TO SUE
[16]
The resolution annexed to Applicant’s
Replying affidavit taken by its board of directors subsequent to its
launching of the
motion proceedings read as follows:
RESOLVED
“
1.
That all steps taken by the company in the Gauteng North High Court
under case number 48248/2010 in order to recover payment
of the total
amount owed by Silverton 481 CC (“Silverton”), George
McDonald and Willem Hendrik Viljoen Erasmus, be
and are hereby
ratified.
2.
That the company hereby confirms its
resolution to institute the aforesaid proceedings and ratifies the
institution of the aforesaid
proceedings.
3.
Wendy Boschetti, in her capacity as financial Manager: Freight
Forwarding, be and is hereby authorised to continue representing
the
Company in such proceedings and to sign all documents and to take all
steps and do all things necessary to give effect to the
above
resolutions”
[21]
Applicants Counsel argued that the
intention of the resolution was to ratify the launching of the
Application by Boschetti even
though she alleged to have been duly
authorised when she deposed to the founding affidavit. Counsel
referred to the matter of Smith
v Kwanonqubela Town Council
1999 (4)
SA 947
(SCA). Watson, the deponent to the founding affidavit in that
matter, was not authorised at the time of instituting the legal
proceedings
and he only acquired the status that authorised him to do
so thereafter. When his lack of authority and the retrospective
ratification
thereof was challenged, the court held that:
“
a
party to litigation did not have the right to prevent the other party
from rectifying a procedural defect. Were it otherwise,
one party
would for instance not be entitled to amend a pleading, especially
not after the filing of an exception.”
[22]
In Merlin Gerin (Pty) Ltd v All Current
and Drief Centre (Pty) Ltd
1994 (1) SA 659
(C) 13, The Respondents
objected to the lack of authority of the Applicant’s director
who at the time of signing the founding
affidavit had no authority to
do so. The Applicant’s board of directors subsequently ratified
the director’s actions.
Explaining the situation, Conradie J on
page 660 FG stated that:
“
For
the enforcement of this right, the respondent has only one remedy, to
move for dismissal of the application. Moving for dismissal
is not
itself a right, but a remedy for the right not to be unfairly
proceeded against. And applicant now has two options. If he
had no
authority to begin with he would attempt to defeat the remedy
(dismissal of his application) by obtaining authority by way
of
ratification and by putting proof of that before the court. Or he
might put better proof of pre-existing authority before the
court.
Once the applicant has done this, he will be bound by an order for
costs against him. In this way, ratification would not
harm but
benefit the respondent, and so would be unequivocal proof of
pre-existing authority.”
Accordingly,
the court held that ratification saved the application.
[17]
It is therefore safe to say that the law
is settled on the point that a person instituting motion proceedings
on behalf of a company
or voluntary association or municipalities or
an artificial person must establish his authority to do so in his
founding affidavit
failing which the defect can be ratified with
retrospective effect if the deponent to the founding affidavit was
indeed acting
on its behalf and not on his own romp.
[18]
Again, in Smith, Rabie CJ recognised
that it is essential for a valid ratification that there must have
been an intention on the
part of the principal to confirm and adopt
the unauthorised acts of the agent done on his behalf, and that that
intention must
be expressed either with full knowledge of all the
material circumstances, or with the object of confirming the agent’s
action
in all events, whatever the circumstances may be. Applicant’s
resolution authorises Boschetti to continue acting on behalf
of the
Applicant and even though not that specific, it also ratifies the
steps that she has already taken. The intention of the
directors to
ratify even those steps is apparent from the resolution’s
ratification of all the steps that the company has
previously taken
in the matter.
LOCUS
STANDI IN JUDICIO OF APPLICANT
[19]
The 3
rd
Respondent’s contention on the locus standi is twofold. Firstly
he argues that Applicant’s failure to sufficiently
plead its
standing in the founding affidavit is fatal to the Application as it
cannot be rectified in its Replying affidavit and
if it is found that
it can, the Applicant remains non-suited to launch the present
proceedings on the basis that the credit facility
agreement was
concluded with ZATRANS. He further disputes that ZATRANS underwent a
name change or was sold to Applicant or is a
division of the
Applicant.
[20]
Whether a litigant
'
s
interest is sufficient to clothe him or her with the required
standing is to be determined in the light of factual and legal
context made-The facts necessary to establish the standing should
appear from the record before the court and must be sufficient
in
their factual and legal context. See Rienaldo Investments v Giants
Concerts CC
2012 (3) All SA 57
SCA.
[21]
It is an established general rule that a
person who claims relief from a court must establish an interest in
that matter in order
to acquire the necessary locus standi to seek
relief. It must be made apparent to the court that he is entitled to
the relief sought.
Rabie ACJ in Cabinet of the Transitional
Government for the Territory of South West Africa v Eins
1988 (3) SA
369
(A) at 388A-I stated that:
“
The
interest must be direct and not therefore not too remote or as it has
also been referred to, an actual and existing interest
in the
matter.”
[22]
It is therefore for the party
instituting proceedings to allege and prove that he has locus standi,
so the onus rests upon the applicant
and that is considered ‘an
onus in the true sense; the overall onus... \Mars Incorporated v
Candy World (Pty) Ltd
[1990] ZASCA 149
;
1991 (1) SA 567
(A) AT 575H-I).’ in a
minority concurring judgment of Harms JA in Gross & Others v Penz
[1996] ZASCA 78
;
1996 (4) SA 617
(A).
[23]
It is trite law as well that such
appropriate allegations to establish locus standi or the interest
should be made in the launching
affidavits, that is the founding
affidavit and not in the replying affidavit, as the Applicant makes
his or her case in the founding
affidavit. See Scott v Hanekom
1980
(3) SA 1182
(C ) at 1188 H and Giant Concerts CC V Minister of Local
Government, Housing and Traditional Affairs, Kwazulu Natal
2011 (4)
SA 164
(KZP) at 170H-I. Failure to do so is no mere technical defect
because the locus standi in judicio of the applicant is fundamental
to the applicant’s rights to claim the orders sought in the
founding affidavit in the absence of which the court should not
entertain the application. See Spoornet v Watson
1994 (1) SA 513
(W).
See also Commentary in Erasmus - Superior Court Practice pages Bl-123
to Bl-126 HH and Rich v Lagerway
1973 (1) SA 485
(W) at 487 B-D. The
purpose is to make sure that all the allegations that Applicant
relies upon for the relief sought are completely
divulged for his
opponent to recognize the case he or she is to meet and be able to
respond fully and adequately.
[24]
The late disclosure of
material facts upon which the case is made out is discouraged in
Transnamib Ltd v Imcor Zinc (Pty) Ltd (Moly
Copper- Mining and
Exploration Corporation (SWA) Ltd and Another Intervening
1994 NR 11
(HC)). It was
confirmed
that an applicant must make out his case in his founding papers and
that such papers are a combination of pleadings and
evidence and
pointed out that an applicant cannot merely set out a skeleton case
in the founding papers and then fortify this in
reply. If scant
material is furnished in the founding papers the applicant runs the
risk of his application being dismissed and
should not complain if
this is done as it was up to him to put more facts to the Court if he
could. The Court may in its discretion
allow deviations from the
normal procedures but it must be borne in mind that the normal
procedures developed as they did because
they would almost invariably
be consonant with the best interests of the administration of
justice.
[31]
The omission in the founding affidavit
of essential averments that Applicant relies upon to establish his
entitlement to the relief
sought may therefore be fatal to the
Application and it would be considered unfair and underhanded to
establish the entitlement
anywhere else other than in the founding
affidavit, unless if the assertions are found to be legitimate
responses to Respondents
allegations and not included solely to
remedy an omission in the launching of affidavits. D E van
Loggerenberg and P B J Farlam
on “Erasmus Superior Court
Practice (2009) B1-B45 to B1-B46 with reference to a few authorities
therein instructs that:
“
all
necessary allegations upon which an Applicant’s case is based
must appear in his or founding affidavit, a court will not
usually
allow an Applicant to make out a completely different claim in his or
her replying affidavit. A court does have a discretion
to allow new
matter in a replying affidavit and a distinction is usually drawn
between a case in which new material is first brought
into light by
the Applicant who knew of it at the time when his or her founding
affidavit was prepared and a case in which facts
alleged in a
Respondent’s answering affidavit revealed the existence or
possible existence of a further ground for relief.
In the latter
case, a court would more readily incline to allow new matter, in a
replying affidavit but then would allow a fourth
set of affidavit.”
[32]
In Applicant’s founding affidavit,
the allegation it relied upon for its locus standi was that it was
previously known as
ZATRANS the company that rendered services for
which the outstanding amount is owing, albeit attaching documentation
in proof
thereof,
and when Respondent in its answering affidavit challenged the
insufficiency of that statement, without forsaking the previous
assertion Applicant then responded by making new assertions in its
replying affidavit regarding the purchasing of ZATRANS business
and
the cession incorporated in the sale agreement with retrospective
effect operative during the granting of the credit facility
and that
ZATRANS was a division of the Applicant so the services that were
rendered to 1
st
Respondent was by Applicant and not ZATRANS.
[33]
Applicant allegations in the founding
affidavit on the locus standi were insufficient, and the averments in
the replying affidavit
constitute new grounds that Applicant relies
upon for claiming the relief sought, than amplify the insufficient
averments in the
founding affidavit. In exercising its discretion the
court should recognize that the establishment of locus standi for the
relief
sought is to be made in the launching affidavit and that in a
situation where it is insufficiently pleaded, and an elaboration is
done on the replying affidavit it would not be fatal if the other
party had an opportunity to respond and address the new facts.
Under
normal circumstances this conduct would have been offensive to one’s
sense of justice.
[34]
3
rd
Respondent sought and got consent from the Applicant to file further
affidavits in response to the new material in the replying
affidavit,
which further affidavits the court had no difficulty allowing, taking
heed of Wepener J’s affirmation in Pangbourne
Properties v
Pulse Moving
2013 (3) SA 140
that: ‘Affidavits can validly be
before the court pursuant to an agreement between the parties-see
Rule 27 (1) which provides
for such an agreement. They can also be
validly before the court if the interest of justice require it.’
Further disclosure
by Applicant of new grounds were in response to
3
rd
Respondent’s challenge, considering that they consists of facts
that Applicant knew but overlooked when it prepared its founding
affidavit, opting to declare unsubstantiated facts makes the
situation different, not exactly as proposed and explained in van
Loggenberg. What should therefore be determined under these
circumstances is whether any prejudice will be suffered by the 3
rd
Respondent in the conduct of his defence as remarked by Leveson AJ
(as he then was) in Brenner's
Service
Station and Garage (Pty) Ltd v Milne and Another
1983 (4) SA 233
(W)
at 237G-H as follows:
“
I
think it emerges from the passage quoted that, in appropriate cases,
the court is entitled to refuse to take heed of a technical
irregularity in a procedure which does not cause prejudice to the
opposite party.”
And
also previously echoed by G Schreiner J in Trans-African Insurance Co
Ltd v Maluleka
1956 (2) SA 273
(A) at 278F-G stating that:
“
(T)echnical
objections to less than perfect procedural steps should not be
permitted, in the absence of prejudice, to interfere
with the
expeditious and, if possible, inexpensive decision of cases on their
real merits.’
[35]
Since the 3
rd
Respondent was afforded an opportunity to deal with the locus standi
as pleaded in the Replying affidavit by being allowed to file
further
affidavits (that being of significant importance) circumventing any
prejudice or injustice that 3
rd
Respondent could have suffered and as no prejudice or injustice was
alleged to have been suffered by the Respondent as a result
of this
irregular way of dealing with the matter even though this was serious
remissness on the part of the Applicant, the Application
was not
rendered fatal.
[36]
A further contention on the 1 ocus
standi in judicio of the Applicant was that even if it is found that
the Application is not fatal
the Applicant is non-suited to bring
this Application, as ZATRANS was the company that granted the
facility and rendered services
to 1
st
Respondent. The sale of ZATRANS to Applicant did not make them one
company or make ZATRANS, a division of the Applicant. This challenge
was not addressed in Applicant’s heads of argument, but during
the hearing its Counsel argued that it was disclosed and apparent
that ZATRANS is a division of Applicant and referred to an annexure
that was part of the credit facility agreement, ZATRANS’s
invoices and forms completed on behalf of 1
st
Respondent to issue instructions or orders that bared Applicant’s
name on the letterhead indicating that ZATRANS is its division.
She
argued that at the time of the transaction, ZATRANS was already a
part of Applicant. Applicant also attached invoices issued
in its
name which were not challenged by any of the Respondents.
Respondent’s Counsel’s did not offer much elaboration
or
authorities on its heads or argument to substantiate its allegations
except for repeating the statements in its papers and that
ZATRANS as
a separate legal persona cannot be a division of another legal
persona.
[37]
A division in company terms denotes a
portion of a business entity (see ‘Longman Business English
Dictionary’) that
operates under a different name. It is still
a part of the entity itself even though it operates under a separate
name, at the
same place or at a different place, generally the
equivalent of a cor
poration
or
limited liability
company
obtaining a
fictitious name
or "
doing business as
"
certificate and operating a business under that fictitious name. The
parent company is legally responsible for all of the
obligations and
debts of the division. So although a division operates separately it
does not run itself separately and is owned
by the primary business.
As generally accepted, the division would be unregistered and have a
fictitious name, so incapable of
suing or being sued in their own
names as they lack a legal persona and accordingly lack capacity to
contract or to sue. Leveson
J in Two Sixty Four Investments (Pty) Ltd
v Trust Bank
1993 (3) SA 384
(W); made a subtle distinction between those with fictitious names
and those whose names are followed by the acronyms Pty and Ltd
and
incorporated, postulating that:
'Under
our law no juristic person is capable of being divided into a number
of separate juristic personalities, all forming a division
of the
whole. The concept is totally alien to our jurisprudence. Thus when
reference is made to a business which is conducted under
a trading
name and the words "Limited" or "(Proprietary)
Limited" are not affixed thereto, no ground exists
for drawing
the inference that the business as an entity enjoys corporate
personality.
If in addition thereto it is said that the business
is a division of a named company, registered according to the laws
of the Republic,
there is only one possible further inference
and that is that the incorporated company
trades through the
medium of the business under that particular trading name.
[38]
Leveson’s statement recognizes
that an incorporated company can operate through the medium of
another entity that enjoys a
separate corporate personality or one
with a fictitious existence. The distinction between the two being
that the latter lacks
the capacity to sue. Griesel J in Ford v
Alphera Financial Services ( A Division of BMW Financial Services)
South
Africa (Pty) Ltd (20932/10)
[2012] ZAWCHC 185
(20 November 2012
deviated from the standard rule that ‘a fictitious entity’,
as indicated by Leveson lacks a separate
legal personality and
finding support in Rule 14 (2) of the Uniform Rules of Court, that
provides that a partnership, firm or association
can sue or be sued
in its own name and with reference to (ed) The Law of South Africa
vol 3 para 55 where Joubert says of these
Rules that they "are
designed to
solidify
and facilitate actions and applications by or against partnerships,
firms and associations which at common law cannot generally
sue or be
sued in their own names apart from the members constituting it."
held that:
‘
"In
my opinion, while the word "division" may not be the most
appropriate ("firm" or "business"
would have been
better), it is perfectly clear that the respondent is a business
concern owned by the company Bankorp Bpk”.
[37]
So although ZATRANS due to the fact that
it is registered, enjoys a separate corporate persona, can sue and be
sued on its own,
it can still be a division of another incorporated
company. It is owned and it transacted as a division of the Applicant
(the parent
company), the inference to be drawn, according to Leveson
is that the Applicant traded through the medium of the business of
ZATRANS
as its trading company. So the Applicant has a direct and
substantial interest in the proceedings which interest the
Respondents
were aware of when the transactions took place. The
corporate personality of ZAT does not take away Applicant’s
right as
the parent company that owns and controls its operations and
carry the responsibility of all its debts and obligations. I
therefore
find that the Applicant has sufficiently established its
entitlement to sue. The law only requires that the controlling party
should
be honest in their operations of such entities and not
contravene
s 20
(9) of the
Companies Act 2008
.
[38]
Besides the documents referred to by the
Applicant, the Application for a credit facility show the letterhead
of ZATRANS and a sheet
with supplementary information in respect of
the
National Credit Act annexed
thereto that exhibits the name
ZATRANS “a division of Barloworld Logistics” the details
of the Applicant. So the documents
completed by the parties to the
agreement did reflect that ZATRANS, the contracting party is a
division of Applicant.
[39]
Respondent then questions the inter
acquisitions of business between the Applicant and ZATRANS after the
sale as proving their separate
existence and personality. The setting
up of a separate legal
entity
in the case of a
corporation
or a
limited liability company
,
in order to separate the
actions
of the entity from those of the other
company
,
incorporating each as a division in the group with a separate legal
personality is not prohibited. As well as their inter-transactions
on
condition they are not with the intention to defraud and there is no
abuse of the juristic personality of the two companies
in relation to
the formation or use of any of the companies.
[40]
3
rd
Respondent’s further contention was that WEMT and Angel
Investment Trust are members of the 1
st
Respondent and so have an interest in these proceedings and were
supposed to have been joined and that the joining of 2
nd
and 3
rd
Respondents as parties was a misjoinder as their names appear in the
CIPRO document in their representative capacities as trustees
of the
2 trusts. In support of this contention the 3
rd
Respondent has referred to the CIPRO document that reflects the name
of 3
rd
Respondent and type of his membership as trust. Applicant, to
challenge that information, in turn attached a document by
Kreditinform
generated for credit profiling, with the names of 2
nd
and 3
rd
Respondents as members. She argued that a trust cannot be a member of
a close corporation as that is in breach of s 29 of the Close
Corporation Amendment Act 25 of 2005 (’’the amendment”)
and reiterated that the issue cannot be resolved without
viva voce
evidence. 3
rd
Respondent’s Counsel countered that response by pointing out
that the same document reflects that WEM Trust holds 100%
shareholding
(probably referring to the member’s interest).
[41]
I do not believe as I have indicated
already that the documentary evidence and consideration of
probabilities will be disturbed
by the viva voce evidence. The
question that needs to be answered has a bearing to the alleged s 23
breach, a question of law,
(Was there a breach of s 23 and if so, who
are the correct members that are to be held liable for the debt and
thus to be joined
in the proceedings?) which in turn will address the
question of a misjoinder and non-joinder..
[42]
The 1 st Respondent as a Close
Corporation (“CC”) has got its own legal personality,
separate from its members and can
sue and be sued in its own name.
Therefore members cannot be cited or joined as members of a CC when
litigating for, or against
a CC unless there has been proof of
members’ abuse of the juristic personality of close corporation
or using corporation
as an instrument to promote own interests
contrary to s 65 of the Act 69 of 1984; See TJ Jonck BK h/a
Bothaville VJeis mark v Du
Plessis NO
1998 (1) SA 971
(O)
or
where the close corporation conducted
business under a name other than its
registered name without giving any indication of
its real name or of the fact that it
was a close corporation. Such conduct was found to
be in contravention of s 23
(provisions relating to the use and publication of names')
and sec 63(a) (failure to use abbreviations ‘BK’ or ‘CC’)
and sufficiently serious enough to constitute
a contravention of s 65
(abuse of separate juristic personality of corporation) of the Act.
See Haygro Catering BK v Van der Merwe
1996 (4) S A 1063
(C). In
these instances the corporate veil is lifted and the close
corporation members can on Application be declared personally
liable
for debts of the close corporation or jointly and severally liable
together with the close corporation for its debts. This
is an avenue
that is available to the Applicant or Plaintiff who is aggrieved due
to the conduct mentioned.
[45]
Applicant’s allegation is that in
the purchase and/or written orders that were issued on behalf of the
1
st
Respondent by 2
nd
Respondent, with the authority of 3
rd
Respondent, the registration numbers of 1
st
Respondent and its full names that indicate that it was a CC was
never detailed in the orders/documents in breach of s 23 of the
Act
as a result 2
nd
and 3
rd
Respondent, as members of the 1
st
Respondent who authorized and issued the orders were personally
liable. Applicant therefore applied that they be declared jointly
and
severally liable together with the close corporation for its debt. It
subsequently amended its notice of motion without opposition
from the
Respondents, claiming payment from either each of the Respondents
individually and or together.
[46]
The 3
rd
Respondent is denying that s 23 has been breached and that 2
nd
and 3
rd
Respondents are members of the 1
st
Respondent with reference to the Kreditinform document that indicates
that Willie Erasmus and Medewerkers Trust has 100% member’s
interest. However the latest CIPRO documents attached to his
answering affidavit dated 03 November 2010 confirm that Erasmus
namens
Willie Erasmus and Medewerkers Trust IT5379/94 as the only
member holding 100% shares. The trustee member, Goerge Macdonald
namens
Angel investments Trust resigned with effect from 14 April
2007 and 2
nd
and 3
rd
Respondent remain as 0% shareholders. S 29(1) A of the
Close
Corporations Amendment Act 25 of 2005
provides that ‘a natural
or juristic person in the capacity of a trustee of an inter vivos
trust may be a member of a corporation’
provided certain
conditions are met. Hence the trustee becomes a member and not the
trust as it is not a ‘juristic person’.
In the absence of
a specific statutory provision that makes a trust a person for that
specific purposes, it is the name of the
trustee that is disclosed in
relation to trust matters. It is to be clearly indicated next to that
person’s name the capacity
of such person that he is acting as
a trustee (i.e. not as a principal or beneficial owner and details of
the testamentary trust
must be given). It is therefore valid to
assume that the same details regarding an inter vivos trust must be
disclosed. So the
proper disclosure would be as follows: "Cilliers,
as trustee of the XYX Trust: reference number_______ , Master’s
Office
Pretoria) ” The amendment did not suddenly enable ‘a
trust’ to be a member of a corporation.
[47]
The 3
rd
Respondent’s allegation that the trust was a member of 1
st
Respondent is therefore incorrect and if true, it would be in breach
of
Section 29.
The true state of affairs with regard to the
membership of the 1
st
Respondent is only what is reflected in its CIPRO documents and
certainly not in the Kreditinform document which information is
also
depended on the data from CIPRO. As indicated the latest information
reflect the 3
rd
Respondent to be a member as trustee of EWMT with 100% shares, and as
a member concerned, 3
rd
Respondent, as between himself and the corporation, personally have
all the obligations and rights of a member. Therefore on
contravention
of the provisions of
Section 23
, he would be liable for
the debts of the corporation. For that reason, 3
rd
Respondent’s contention on the non-joinder of the Trust,
misjoinder of the 2
nd
and 3
rd
Respondents and insistence that a trust can be a member of a CC is
misconceived and without merit.
[48]
Applicant
alleged that there was a contravention of the provisions of s 23 of
the Act in that the registration number and full name
of 1
st
Respondent were not disclosed in the purchase orders or written
clearing instructions that were issued on behalf of 1
st
Respondent by the 2
nd
Respondent as authorised by 3
rd
Respondent. 3
rd
Respondent
Counsel
argued that the instructions were issued by completing forms provided
by the Applicant and copies of which it attached to
its replying
affidavit. All the forms that had full orders or instructions
reflected the abbreviation CC after the name of the
1 st Respondent,
with several of them without the registration numbers. The copies
that Applicant also attached as proof of clearing
instructions by 2
nd
Respondent on behalf of 1
st
Respondent indicate the full name of 1
st
Respondent ending with CC.
[49]
The relevant provisions of the Act
provides on s 23 (2) that: If any member of, or any other person on
behalf of, a corporation-
(a)
issues or authorizes the issue of any
such notice or official publication of the corporation, or signs or
authorizes to be signed
on behalf of the corporation any such bill of
exchange, promissory note, endorsement, cheque or order for money,
goods or services;
or
(b)
issues or authorises the issue of any
such letter, delivery note, invoice, receipt or letter of credit of
the corporation, [Para,
(b) substituted by s. 8 (b) of Act 26 of
1997.]
without
the name of the corporation, or such registered literal translation
thereof, and its registration number being mentioned
therein in
accordance with subsection (1) (b), he shall be guilty of an offence,
and shall further be liable to the holder of the
bill of exchange,
promissory note, cheque or order for money, goods or services for the
amount thereof, unless the amount is duly
paid by the corporation.
[50]
The above section is duly complemented
by s 63 (a) of the Act that provides for personal liability of a
member of a CC for its debts
for the use of the name of the CC
without the abbreviation CC thereafter. In determining whether a
breach of either of the sections
has been committed it is important
to consider the purpose for their enactment, by looking at the
interpretation bestowed on the
statutes. In G & C Construction v
De Beer en Ander
2000 (2) SA 378
(T) the court concluded that the
intention of the statutes was for the member to be held liable only
if the other party to the
agreement was unaware that it was dealing
with a CC, and if that lack of knowledge was due to the CC member’s
conduct. The
court dismissed with costs the claim brought against De
Beer personally for the outstanding payment for the months during
which
G & C had already become aware of the existence of the CC
and that De Beer had been acting on its behalf. The intention of the
statutes clearly being to protect and make sure that a party is aware
of the identity and of the status of an entity it is contracting
with, if it is a close corporation that is duly registered with a
legal personality.
[51]
The documents on which the instructions were issued are indeed
Applicant’s forms and not a document generated by the
1
st
Respondent and had the full name of the 1
st
Respondent. Applicant, in its founding affidavit confirmed that 2
nd
Respondent provided it with a Vat number and a company registration
number CK2007/044211/23 which belongs to 1
st
Respondent, upon which it relied in making its decision to conduct
business with the 1
st
Respondent. So apart from the orders that bore the full name of the
1
st
Respondent, Applicant, from the beginning was aware that 1
st
Respondent was a close corporation being in possession of its
registration number and had made its decision fully aware of the
limitations of its dealings. Applicant bore the onus to prove that
there was an intention to conceal the status of the 1
st
Respondent for it to succeed in its claim against the members of 1
st
Respondent. It failed to establish any intention to conceal the real
status therefore failed to prove the alleged s 23 breach and
therefore is not entitled to the relief sought against the member/s
of the 1
st
Respondent. The claim against 2
nd
and 3
rd
Respondents must fail, even though Applicant has proved its claim
against the 1st Respondent, since there is evidence of services
being
rendered to 1
st
Respondent and the sum claimed has not been effectively challenged.
[52]
Whereas the claim against 3
rd
Respondent has not been successfully proven, since the points in
limine it raised have not been successful, no costs has been granted
in its favour.
[53]
Under the circumstances the following
order is made:
[53.1]
The 3
rd
Respondent’s points in limine are dismissed.
[53.2]
Judgment is granted against the 1
st
Respondent for:
[53.2.1]
payment of
the sum of R399 133.85 plus interest thereon at the rate of 15.5% per
annum a tempore morae
[53.2.2]
Costs of suit
[53.3]
Application against 2
nd
and 3
rd
Respondent is dismissed with no
order
as to costs
N V
KHUMALO J
ACTING
JUDGE OF THE NORTHGAUTENG HIGH COURT
Counsel
for Plaintiff: E F Dippenaar SC
Instructed
by: Breytenbach Mostert Skosana Inc
Counsel
for 3
rd
Respondent: Adv S G Maritz
Instructed
by: Potgieter Marais