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
>>
2009
>>
[2009] ZAGPPHC 157
|
|
Manitoba Investment Holdings Ltd v Lipchin and Others (36514/2008) [2009] ZAGPPHC 157; 2010 (2) SA 612 (GNP) (8 October 2009)
IN
THE HIGH COURT OF SOUTH AFRICA
/ES
(
NORTH
GAUTENG HIGH COURT. PRETORIA
)
CASE
NO: 36514/2008
DATE:
8-10-2009
IN
THE MATTER BETWEEN
MANITOBA
INVESTMENT HOLDINGS LTD APPLICANT
AND
JUDD
LIPCHIN 1
ST
RESPONDENT
PENELOPE
VALERIE LATTER 2
nd
RESPONDENT
VERED
ESTATES (PTY) LTD 3
rd
RESPONDENT
THE
REGISTRAR OF COMPANIES 4
th
RESPONDENT
JUDGMENT
PRINSLOO.
J
[1]
This matter came before me as an opposed application. Mr Liversage
appeared for the applicant and Mr Blou appeared for the first
and
second respondents. There was no appearance for the third respondent.
The fourth respondent indicated, in writing, that he
{or she) would
abide by the decision of this court.
INTRODUCTION
AND BACKGROUND
[2]
The applicant is an international business company, incorporated, in
May 2000, in the British Virgin Islands by the Registrar
of Companies
of those Islands pursuant to the International Business Companies
Act, CAP. 291. with administrative address in St
Peter Port.
Guernsey, British Virgin Islands.
[3]
On 27 September 2000. the South African Registrar of Companies (the
fourth respondent) registered the applicant as an external
company in
terms of the provisions of section 322 of the Companies Act. no 61 of
1973 ("the Act").
[4]
On or about 20 January 2008. the applicant, duly represented by a
local agent, entered into a deed*-of sale ("the deed
of sale")
in terms of which the applicant purchased a property known as 42 13
th
Avenue, Parktown North, from the first ' and second respondents. The
third respondent was the estate agent involved.
The
purchase price was R5 400 000.00 of which a deposit of R400 000.00
had to be paid on conclusion of the agreement, or. in any
event, by
not later than 7 February 2008.
[5]
The deposit was duly, and timeously. paid.
[6]
A suspensive condition to the effect that the sale was subject to the
applicant obtaining a loan of not less than Rl 600 000.00
was waived
on behalf of the applicant.
[7]
It was arranged between the parties that the transfer documents,
prepared by conveyancers on behalf of the sellers, would be
furnished
to the applicant's attorney so that signature thereof could be
arranged.
[8]
Shortly after receipt of the transfer documents drafted by the first
and second respondents' attorney, the applicant's attorney
conducted
a company search and discovered that the external registration of the
applicant,
.supra,
had
been de-registered by the-fourth respondent with effect from 27 May
20Q5. This was done in terms of the provisions of section
332 of the
Act. The
Government
Gazette
of
27 May'2005. proclaiming this de
:
registration,
forms part of the papers.
[9]
It is common cause between the parties that the de-registration took
place. The circumstances under which the fourth respondent
brought
about the de-registration were not disclosed or debated in the papers
or during the proceedings before me. Nevertheless,
it appears from
the provisions of section 332 of the Act that such a de-registration
would follow if the external company ceases
to have a place of
business in the Republic or fails, on demand by the fourth
respondent, to supply details of the place of business,
if any.
[10]
The deponent on behalf of the applicant, which is the duly authorised
local representative,
supra,
alleges
that he was unaware of the de-registraiion aforesaid.
[11]
It is obvious that the de-regi strati on of the applicant as an
external company took place many months before the deed of
sale was
entered into.
[12]
On 4 April 2008 the attorneys of the sellers (first and second
respondents) wrote to the applicant's attorney, placing on record
that the transfer costs had not yet been paid, neither had bank
guarantees been furnished in respect of the outstanding balance
of R5
million on the purchase price. In terms of clause 9 of the deed of
sale the applicant was placed on terms to remedy these
breaches
within ten days failing which the sellers would invoke their rights
flowing from the deed of sale.
[13]
On 9 April 2008 the applicant's attorney wrote to the respondents'
attorney pointing out that the external company had been
de-registered. The applicant's attorney continues with the letter
along the following lines:
"(c)
it has also recently been established that the de-registration of the
external company had been effected prior to the
signature and
execution of the relevant agreement of sale. We are instructed to
confirm that the representative who signed the
agreement on behalf of
our client was unaware of the status of de-registration of the
company at the time. Our instructions are
consequently to apply to
the High Court for the registration of the company to be restored in
terms of the provisions of section
73(6).
(d)
Be that as it may, it follows that at the time the relevant agreement
of sale was entered into, the purchaser being an external
company
having been de-registered had no legal or contractual capacity to
conclude the particular agreement. As a consequence,
it is submitted
that the relevant agreement is therefore null and void
ah
initio,
(e)
The implication of the agreement being null and void
ab
initio
is
that the respective parties are to be restored in the position had
the agreement- not been entered into. As such, our instructions
are
therefore to demand from your client, as we hereby do, repayment of
the deposit of R400 000,00 already paid by our client herein
within 3
(three) days from date hereof, failing which our instructions are, on
behalf of the overseas company, to apply to the
High Court for the
appropriate relief in the circumstances."
[14]
On 11 April 2008. the third respondent, via electronic mail, in
answer to the demand, informed the applicant's attorney that
it
considered the deed of sale to be "valid in all respects".
The attitude of the third respondent was that the external
company,
despite its de-registration, remained a properly constituted legal
entity incorporated abroad. On behalf of the third
respondent
reference was also made to
the
breaches of contract with regard to the payment of the transfer costs
and the furnishing of a guarantee for the balance of the
purchase
price.
[15]
On behalf of the first and second respondents, their attorney also,
on 11 April 2008. in response to the demand, recorded that
they do
not accept that the deed of sale was null and void
ab
initio.
They
were not prepared to refund the deposit. Pending restoration of the
company's registration, the deed of sale remained "intact,
valid
and binding".
On
behalf of the first and second respondents reference was also made in
this instance to the earlier demand flowing from the breaches
of
contract on the part of the applicant.
[16]
On 23 April 2008 the attorney of the first and second respondents,
in writing, notified the applicant's attorney that his
clients were
cancelling the agreement of . sale in view of the breaches aforesaid
and in view of the fact that the breaches were
not remedied in
response to the earlier demand already referred to.
[17]
On 31 July 2008 the applicant launched this application for the
following declaratory and ancillary relief:
1.
that the deed of sale be declared null and void
ab
initio;
2.
that the third respondent be ordered to refund the deposit of R400
000.00 with interest;
3.
costs in the event of opposition.
[18]
The third respondent filed an opposing affidavit disputing the
allegation that the deed of sale is null and void
ah
initio.
Because
the third respondent was not represented at the hearing. I do not
propose dealing further with the submissions contained
in the
latter's opposing affidavit.
[19]
Instead of filing an opposing affidavit, the first and second
respondents filed a notice in terms of rule 6(5)(d)(iii) raising
the
questions of law which will be considered in the course of this
judgment.
THE
APPLICANT'S MAIN ARGUMENT: ACQUISITION OF THE IMMOVABLE PROPERTY WAS
PROHIBITED BY THE PROVISIONS OF SECTION 324(2) OF THE ACT
[20]
It is convenient to quote the provisions of section 324 of the
Act:
"324.
Power of external company to own immovable property in Republic- (1)
Save as may be expressly provided in any other law.
an external
company of which the memorandum has been registered under section 322
shall have the same power to own immovable property
in the Republic
as if it were a company incorporated in the Republic. (2) As from a
date three months after the commencement of
this Act. no external
company shall be capable of acquiring
the
ownership
of immovable property in the Republic unless its memorandum has been
or is deemed to be registered under section 322." (Emphasis
added.)
[21]
Section 322, under the heading "registration of memorandum of
external company" prescribes the formalities to be
complied with
by the external company in order to obtain registration under this
section. In essence, subsection (1) contains a
list of documents,
notices and other particulars that must be supplied to the Registrar
in order to bring about the registration
of the memorandum of the
external company.
In
abbreviated form, section 322(1) reads as follows:
"(1)
. Every external company shall
within
twenty-one days after the establishment of a place of business in the
Republic
lodge with the Registrar, in the prescribed manner-
(a)
a certified copy of the memorandum of the company ...
(b)
a notice under section 170 in the prescribed form of the registered
office and postal address of the company
(c)
the consent of and the name and address of the auditor of the company
...
(d)
a notice of the financial year of the company ...
(e)
a list in the prescribed form containing particulars-
(i)
in
respect of each director ...
(ii)
in
respect of the local manager ...
(iii)
the name and auuress
oi
the
auditor ...
(o
...
(g)
a notice in the prescribed form of the name and address of the person
authorised by the company to accept service ...
(h)
..." (Emphasis added.)
[22]
In terms of section 323(1) the effect of the registration of the
memorandum of the external company is that upon such registration
the
external company shall be a body corporate in the Republic subject to
the applicable provisions of the Act.
[23]
It is clear that the establishment of a place of business in the
Republic by the external company plays a central role in the
provisions of the Act (Chapter XIII) dealing with external companies:
it is the event that sets in motion the process of bringing
about
registration of the memorandum of the external company (section 322)
and if the external company ceases to have a place of
business in the
Republic, such event will also lead to the de-registration of the
external company in the Republic (section 332.
supra).
[24]
Of importance, for purposes of the present enquiry, is the definition
of "external company" to be found in section
1 of the Act.
It "means a company or other association of persons,
incorporated outside the Republic, the memorandum of which
was lodged
with the registrar under the repealed Act,
or
which,
since the commencement of this Act, has established a place of
business in the Republic and for purposes of this definition
establishing a place of business shall include the acquisition of
immovable property
"
(emphasis added).
The
term "acquisition" or. for that matter, "acquire"
is not defined in the Act.
From
a general reading of these provisions, it seems to me. the following
picture emerges for present purposes: the external company
(the
applicant in this case) establishes a place of business in the
Republic through the acquisition of immovable property (the
Parktown
property in this case). Within twenty one days after establishing the
place of business in this fashion, the external
company (applicant)
lodges the required documentation with the Registrar (fourth
respondent) in terms of the requirements of section
322(1).
supra.
The
memorandum of the external company is then registered by the
Registrar in terms of section 322(2). This opens the door for the
applicant to acquire
the
ownership
of
the immovable property in the Republic without acting in
contravention of the prohibition to be found in section 324(2) of the
Act,
supra.
The
only reasonable conclusion to be drawn from this analysis, in my
view, is that the applicant, when entering into the agreement
of
purchase and sale of the Parktown property, was not prohibited from
doing so by the provisions of section 324(2) of the Act:
it was
perfectly entitled to do so in order to establish a place of business
in the republic
whereafter
it had the opportunity to set the section 322 process in motion in
order to obtain registration of its memorandum which would enable
it
to acquire
the
ownership
of the property by taking transfer thereof in its name.
This
conclusion, in my view, also puts paid to a further argument offered
by Mr Liversage, although it was not pleaded in the founding
affidavit, to the effect that the agreement of sale was void because
of initial impossibility of performance. On the construction
which I
have preferred, there was no initial impossibility of performance.
In
order to fully ventilate this question, it seems to me that one
should also consider the meaning of the term "acquisition"
in the context of the definition of "external company",
supra,
as
well as the provisions of section 324(2) of the Act.
The
first observation to be made, which is in my view not insignificant,
is the fact that the definition only requires "
the
acquisition of immovable property
"
whereas section 324(2) deals with "
acquiring
the ownership of immovable property
"
(emphasis added).
Apart
from the striking difference, as emphasised, between the two
provisions, it seems that another construction, namely that
"acquisition of immovable property" ^as it appears in the
definition, means "acquisition of ownership" (including,
as
it must, the registration of transfer) as it appears in section
324(2). would lead to absurd results: as Mr Blou argued, it
would
mean that the prohibition of section 324(2) would effectively prevent
an external company from establishing a place of business.
It would
also ignore the opportunity, created by section 322(1), for the
external company to bring about the registration of the
memorandum by
setting the process in motion within twenty one days after
establishing the place of business.
Consequently,
the only reasonable conclusion is that "acquisition" as it
is found in the definition, must be construed
as the acquiring of a
right to obtain ownership rather than the obtaining of ownership
itself.
These
are the exact sentiments expressed by the learned author Meskin.
Henochsberg
on the Companies Act
volume
1 p647:
"Regard
must be had to the definition of an external company in section 1(1).
Since the commencement of this Act, the acquisition
of a place of
business in South Africa by a company incorporated elsewhere makes
such company an external company as defined and
for the purposes of
such definition, the establishment of a place of business in the
Republic includes the 'acquisition of immovable
property':
accordingly, such acquisition obliges such company to register under
section 322. To avoid an irreconcilable conflict
between the said
definition and section 324, it is submitted that, in the definition
of external company, 'acquisition' must be
construed as the acquiring
of a right to obtain ownership (eg the
conclusion
of a deed of sale), rather than the
obtaining
of
ownership itself (which would ensue on registration of the transfer
in the deeds office)."
Exactly
the same argument is offered by the authors Blackman. Jooste and
Everingham,
Commentary
on the Companies Act,
Volume
2 pl3-14.
[32]
It seems that our courts have recognised that the word "acquire"
can be interpreted as connoting ownership or merely
the right to
obtain ownership. In
Transvaal
Investment Co Ltd
v
Springs
Municipality
1922
AD 337
, INNES, CJ said the following at 341:
"Now,
juristically, the word 'acquire' connotes ownership; the ordinary
legal meaning implies the acquisition of
dominium.
To
acquire a thing is to become the owner of it. No doubt it may be used
in a wider sense so as to include the acquisition of a
right to
obtain the
dominium;
but
the narrower meaning is the accurate and more obvious one."
In
.that particular case the learned Chief Justice held that the wording
of the legislation afforded strong evidence of an intention
on the
part of the legislature to use the word in the former sense. In a
concurring judgment, SOLOMON. JA said the following at
347:
"Now
although the primary and natural meaning of the words 'to acquire
property' is to become the owner thereof, nevertheless
the word
'acquire' may be rightly used in respect of property which has been
purchased even though it has not been registered."
[33]
For all the reasons mentioned, it seems to me that, in the particular
case under discussion, the correct approach would be
to opt for the
last-mentioned, or wider definition.
[34]
I add that no real assistance is gained from consulting the
dictionaries. The
Concise
Oxford Dictionary,
7
lh
edition p9 defines "acquire" as "gain by and for
oneself: come into possession".
The
Bilingual
Dictionary
of
Bosman. Van-der Merwe and Hiemstra on p677 offers the following
Afrikaans alternatives for "acquire": "verwerf,
verkry. erlang. aanskaf'. The question of ownership is not mentioned.
[35]
In view of the aforegoing. I have come to the conclusion that the
main argument advanced by the applicant, namely that the
prohibition
contained in section 324(2) renders the deed of sale null and void
ab
initio,
must
fail.
THE
SECOND ARGUMENT OFFERED BY THE APPLICANT: THE DE-REGISTRATION
RESULTED IN THE APPLICANT LOSING ITS CAPACITY TO CONCLUDE ANY
FORM OF
AGREEMENT. WHICH RESULTED IN THE
DEED
OF SALE BEING NULL AND VOID
[36]
The respondents argued that an external company does not lose iis
legal
persona
once
it is de-registered within the Republic. Mr Liversage. if I
understood him correctly, initially conceded that this proposition
is
good in law. He referred to the case of
Wiseman
v
Ace
Table Soccer (Pry) Ltd
1991
4 SA 171
(W) where CLAASSEN, AJ (as he then was) said the following
at 176F when discussing the provisions of section 322 of the Act:
"It
seems to me that this particular section is procedural by nature. It
lays down the mechanism for registering an external
company under the
South African Companies Act. It does not purport to create
substantive law by giving legal personality to a body
which
previously did not have such ' legal personality. In fact, to the
contrary, it recognises that an external company is in
facf'a
company' or_'a body corporate' prior to its registration under
section 322. It merely lays down a peremptory procedure to
ensure
that an external company after complying with such procedures will be
on equal par with a South African incorporated company.
It is
noteworthy that neither chapter XIII (which deals with external
companies) nor the Act in general declares an external company
which
has not registered illegal. The Act does not declare an unregistered
external company illegal as it does, for example, in
section 30 a
company with more than twenty members, doing business for gain, which
has not registered under the Act."
[37]
I was also referred to
Sackstein
NO v Pruudfuot SA (Ply) Ltd
2003
4 SA 348
(SCA) where the following is stated at 357F-H:
"Thirdly,
it must be accepted that the registration in the Republic of South
Africa of an external company does not result
in there being two
separate legal
personae.
registered
respectively in two countries [See
Wiseman
v
Ace
Table Soccer (Pty) Ltd
1991
4 SA 171
(W) at 173E;
Ward
v
Smit
and Others: in re Gurr
v
Zambia
Airways Corporation Ltd
1998
3 SA 175
(SCA); C F Forsythe
Private
International Law
(1996)
3
rd
edition at 182 note 280.] There is only one legal
persona,
registered
in two countries."
[38]
Against this background. I fail to see how the de-registration of the
external company, in terms of section 332, could have
any effect on
the legal capacity of the applicant which was still a duly registered
foreign company and legal
persona
at
the time when the deed of sale was entered into.
[39]
In support of his argument that legal capacity was lost through
de-registration. Mr Liversage relied on a more recent decision
of
B
& P Group Financial Services (Pty) Ltd; Pother v Kaltecha and
Others
[2007]
JOL 19260
(T) where it was held that as long as an external company
remains registered as such under the Companies Act, legal effect and
recognition must be given to such registration regardless of the fact
that the company was de-registered in its country of origin.
For
purposes of its economic activity an "external company"
registered as such does not derive its legal capacity from
its
registration in its country of origin but from its registration as an
external company under the Act.
In
that case the converse situation applied: the foreign company hag
1
been de-registered in its country of origin but not de-registered as
an external company in South Africa. The question for decision
was
whether or not the company-continued to have legal capacity under
South African company law. The court answered that question
in the
affirmative. I agree with the submission made by Mr Blou that this
case is not authority for the proposition that in the
converse
situation, ie where the company has not been de-registered in its
country of origin but has been de-registered in South
Africa, it
thereby loses legal capacity to contract in South Africa.
I
also agree with the argument advanced on behalf of the respondents
that the definition of "external company",
supra,
puts
paid to the applicant's argument. In terms of that definition,
already analysed, the foreign company, not yet registered locally
in
terms of the Act, can acquire immovable property in order to
establish a place of business. This is exactly what happened in
the
present instance because, when the applicant entered into the
agreement of sale, it was not registered locally, having been
de-registered in 2005.
[40]
In the result. I am of the view that there is no merit in the
argument that legal capacity was lost through the de-registration.
THE
ORDER
[41]
For all the reasons mentioned, I have come to the conclusion that
the application must fail.
[42]
I make the following order:
1.
The application is dismissed.
The
applicant is ordered to pay the costs.
WRC
PRINSLOO
JUDGE
OF THE NORTH GAUTENG HIGH COURT
36514-2008
HEARD
ON: 11 AUGUST 2009
FOR
THE APPLICANT: A LIVERSAGE
INSTRUCTED
BY: POTGIETER, PRINSLOO, BEKKER
FOR
THE 1
st
AND 2ND RESPONDENTS: J BLOU
INSTRUCTED
BY: WERKSMANS INC