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[2011] ZAFSHC 189
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Divine Heights 5 CC v Greg & Sons Enterprises CC and Another (1844/2011) [2011] ZAFSHC 189 (24 November 2011)
FREE STATE HIGH
COURT, BLOEMFONTEIN
REPUBLIC OF SOUTH
AFRICA
Case No. : 1844/2011
In the matter between:-
DIVINE HEIGHTS 5 CC
….............................................................
Applicant
and
GREG & SONS
ENTERPRISES CC
….............................
First
Respondent
GRIMBEEK, VAN
ROOYEN AND PARTNERS
INCORPORATED
….....................................................
Second
Respondent
______________________________________________________
HEARD ON:
17 NOVEMBER 2011
_______________________________________________________
JUDGMENT BY:
HANCKE, J
_______________________________________________________
DELIVERED:
24 NOVEMBER 2011
_______________________________________________________
[1] The applicant seeks
an order declaring a written agreement of sale, concluded between the
applicant and the first respondent,
in respect of immovable property
described as portion of Erf 360, Kroonstad, dated 14 February 2005 to
be of force and effect and
binding on those parties and directing the
first respondent to forthwith instruct conveyancing attorneys to
effect registration
of transfer of the immovable property forming the
subject matter of the sale agreement from the first respondent to the
applicant.
[2] It appears from the
papers that during 2001, the sole member of the applicant, Mr. Seedat
and the first respondent concluded
a written agreement of sale in
respect of the purchase and sale of the said immovable property.
Seedat purchased the immovable
property through an entity described
as Megaphase Trading 256 CC being a shelf corporation bought by
Seedat from his erstwhile
attorney for the purpose of purchasing the
immovable property. Unbeknown to Seedat, his erstwhile attorney in
the meantime sold
Megaphase to a third party and Seedat was provided
with a new shelf corporation, namely the applicant. As a result, on
14 February
2005 the applicant (represented by Seedat) and the first
respondent (represented by attorney Gresse) concluded the sale
agreement
which is the subject of the present application.
[3] It is applicant’s
case that the suspensive conditions, which were part of the sale
agreement, have been fulfilled and
further that the full purchase
price was paid in cash by the applicant into the trust account of the
second respondent, in compliance
with clause 2 of the sale agreement.
Since approximately 2005, the applicant has been in
de facto
control of the immovable property and has let the immovable property,
unchallenged by the first respondent, to third parties. Further,
despite the aforementioned, the first respondent has failed to effect
registration of transfer of the immovable property and the
applicant
has been forced to bring this application for the relief claimed.
[4] The first respondent
opposes the application on the following basis:
(i) At the time of the
conclusion of the sale agreement on 14 February 2005 Seedat was not a
member of the applicant and therefore
unable to represent the
applicant in concluding the sale agreement. As a result, the first
respondent alleges that the sale agreement
does not comply with
section 2(1) of the Alienation of Land Act, 68 of 1981;
(ii) The applicant has no
locus standi
to bring this application in that, at the date of
the signing of the notice of motion, the applicant was finally
deregistered;
The first respondent’s
attorney, Mr. Gresse, was not authorised to conclude the sale
agreement on behalf of the first respondent.
[5] It is common cause
that the sale agreement was concluded on 14 February 2005 and that
Mr. Seedat only became a member of the
applicant on 1 March 2005. Ms
Robertson, counsel for the applicant, submitted that Mr. Seedat was
empowered in law to represent
the applicant the moment he acquired
the
de facto
ownership of the entire members’ interest
in applicant in or about November 2004. This he did, according to the
argument,
when he acquired the shelf corporation (being the
applicant), paid for the shelf corporation and secured full transfer
of the members’
interest in the applicant. She also submitted
that when members’ interest in a corporation is sold, full
rights of ownership
vest in the new purchaser even before
registration of transfer of the member’s interest in the
Companies Registration Office.
She contended that upon paying the
price and fulfilling other conditions relating to the transfer of
ownership, the purchaser of
the members’ interest can act as a
lawful owner of or holder of rights attached to the members’
interest in the corporation.
[6]
Ms Robertson also referred to Henochsberg
on
the
Close
Corporations Act Vol III
,
where the following is stated on p. 74:
“
It is
submitted that, as between a person (A) acquiring an existing
member’s (B’s) interest, or portion thereof, delivery
of
the interest, or such portion, entails a cession by B to A of the
right in which it consists ... It is submitted that if A and
B sign
the amended founding statement for purposes of giving effect to the
acquisition, ordinarily and implied cession of the rights
will occur
upon signature thereof.”
[7] It is necessary to
have regard to section 2(1) of the Alienation of Land Act, which
provides as follows:
“
(1) No
alienation of land after the commencement of this section 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.”
[8] As far as the
authority of a member
1
of a close corporation is
concerned, Lewis, AJA stated the following in
NORTHVIEW
SHOPPING CENTRE (PTY) LTD v REVELAS PROPERTIES JOHANNESBURG CC AND
ANOTHER
2010
(3) SA 630
(SCA) at par. [17]
“
[1
7]
Section 54(2) does no more than express the usual rules relating to
ostensible authority. And s 54(1) simply confers on a member
authority to act for a close corporation, as the common law confers
on a partner the power to bind the partnership. The section
does not
regulate the question of written authority for the purpose of s 2(1)
of the Alienation of Land Act, as it is assumed s
69 of the Companies
Act does. It is clear, however, that, on the reasoning in
Potchefstroom
Dairies
,
2
a
member, who by law can represent a close corporation, need not have
written
authority.
But
why should that be true of an agent of the close corporation who is
not a member,
as
is the case with Christelis?”
(My
italics)
[9]
Being the
de
facto
owner does not improve Seedat’s position. It must be kept in
mind that since a close corporation is a juristic person,
its assets
are held by it and even the members are not co-owners thereof.
3
As
far as the legal status or position of Seedat is concerned, he at
that stage only has a personal right against Greeme
4
,
the then member of the applicant, and that up until Seedat became a
member of the applicant, no authority arising by implication
of law
was conferred by statute upon him to enter into a contract for the
sale of immovable property. It is also important to note
what was
stated in
NORTHVIEW
SHOPPING CENTRE (PTY) LTD
,
supra
,
at par. [26]:
“
The
object of s 2(1) of the Alienation of Land Act is to ensure certainty
in respect of contracts for the sale of land. That object
is not
defeated if a functionary of a company or a close corporation or any
other juristic entity signs such a contract. There
is no uncertainty
about the functionary's authority. It derives from law. In Bristowe
J's words, the authority 'arises by implication
of law'. But where
the authority arises from the expression of will (an 'express
authorisation') it must be in writing. If it were
not, the
uncertainty as to the authority would defeat the object of the
section.”
[10] It follows therefore
that for the present agreement to be of force and effect, the said
agreement on 14 February 2005 had to
be singed by either the then
member of the applicant, Mr. Greeme or by Mr. Seedat, with the
written authority of Mr. Greeme.
[11] The applicant in its
replying affidavit relies on a resolution of the applicant adopted on
14 June 2011, stating that:
“
The Close
Corporation hereby ratifies and approves the purchase of the
immovable property of sale concluded on 14 February 2005...”
In view of the wording of
section 2 of the Alienation of Land Act
“
the
agent has to have prior authority and thus contracts for the sale of
land by agents without authority cannot be ratified, not
even in
writing”.
5
Ms Robertson, in my view
correctly, conceded that if it is found that the contract is of no
force and effect, it cannot be ratified.
[12]
In view of what was said above, the agreement dated 14 February 2005
appears to be of no force and effect. This is an unfortunate
result,
because the applicant paid the full purchase price to the first
respondent’s transferring attorneys and the applicant
has been
in occupation of the property for about six years.
Apart from
the merits of the application, it is clear that the legal profession,
in particular Mr. Gresse of the second respondent,
has left the
applicant in the lurch by not effecting registration of the said
property in the applicant’s name for the past
six years.
It follows that the applicant cannot succeed in obtaining any relief.
In view of the conclusion reached by me it is not necessary
to deal
with the other submissions raised by Mr. Van Rooyen, on behalf of the
first respondent.
[13] According the
application is dismissed with costs.
_______________
S.P.B. HANCKE, J
On behalf of applicant:
Adv. C.L. Robertson
Instructed by:
Webbers Attorneys
BLOEMFONTEIN
On behalf of first
respondent: Adv. P.C.F. van Rooyen SC
Instructed by:
Phatshoane Henney Inc.
BLOEMFONTEIN
/sp
1
Section
54 of the Close Corporation Act, No 69 of 1984 provides:
“
(1)
Subject to the provisions of this section, any member of a
corporation shall in relation to a person who is not a member and
is
dealing with the corporation, be an agent of the corporation,
Any act of a member
shall bind a corporation whether or not such act is performed for
the carrying on of the business of the
corporation unless a member
so acting has in fact no power to act for the corporation in the
particular matter and the person
with whom the member deals has, or
ought reasonably to have, knowledge of the fact that the member has
no such power.”
2
Potchefstroom
Diaries and Industries Co Ltd v Standard Fresh Milk Supply Co
1913
TPD 506
3
Cilliers
and Benade
Corporate Law (
Third
Edition) p. 601.
4
Henochsberg
opcit
p. 74.
5
De
Villiers and Macintosh
The Law of
Agency in South Africa
(Third Edition)
by J M Silke. See also
The Law of South
Africa
Vol I par. 204.