Masibuyisane Services (Pty) Ltd v Eqstra Corporation (Pty) Ltd (1245/2019) [2020] ZASCA 159 (1 December 2020)

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[2020] ZASCA 159
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Masibuyisane Services (Pty) Ltd v Eqstra Corporation (Pty) Ltd (1245/2019) [2020] ZASCA 159 (1 December 2020)

THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 1245/2019
In
the matter between:
MASIBUYISANE
SERVICES (PTY) LTD

APPELLANT
and
EQSTRA
CORPORATION (PTY) LTD

RESPONDENT
Neutral
citation:
Masibuyisane
Services (Pty) Ltd v Eqstra Corporation (Pty) Ltd
(1245/2019)
[2020] ZASCA 159
(1 December 2020)
Coram:
MAYA
P, DLODLO and NICHOLLS JJA and MATOJANE and SUTHERLAND AJJA
Heard:
2
November 2020
Delivered
:
This judgment was handed down electronically by circulation to the
parties’ representatives by email, and by publication
on the
Supreme Court of Appeal website and release to SAFLII. The time and
date for hand down is deemed to be 10h00 on 1 December
2020.
Summary
:
Consequences of conversion of a close corporation into a company in
terms of s 29C(1) of the Companies
Act 61 of 1973 and vice versa, in
terms of the Close Corporation Act 69 of 1984 – validity of
suretyship concluded by company
after it had converted from a close
corporation – company cited in suretyship as a close
corporation
–
absence
of any hiatus or interruption of juristic personality upon conversion
– appeal dismissed.
ORDER
On
appeal from:
Gauteng
Division of the High Court, Pretoria (Unterhalter J, sitting as court
of first instance):
The
appeal is dismissed with costs.
JUDGMENT
Sutherland
AJA:
(Maya
P, Dlodlo and Nicholls JJA and Matojane AJA concurring):
Introduction
[1]
The controversy, in this case, is one that only lawyers could
appreciate. It concerns
the consequences of a close corporation (CC)
converting itself into a company. What happens if after that
conversion a contract
is concluded by the directors of the company in
which contract the company is described as a close corporation? Can
the company
repudiate it on the grounds that it was concluded with an
entity, ie the CC, that ‘no longer exists’?
[2]
The case originated when the respondent, Eqstra Corporation (Pty) Ltd
(Eqstra), obtained,
on 22 September 2014, a default judgment against
the appellant, Masibuyisane Services (Pty) Ltd, wherein it was cited
as Masibuyisane
CC, in respect of a suretyship in the respondent’s
favour. The appellant wants the judgment to be rescinded. The basis
for
the rescission application is the proposition that the suretyship
is invalid, for the reason mentioned. The court a quo refused
to
rescind the judgment, hence the appeal to this Court with the
former’s leave.
The material
common cause facts
[3]
Masibuyisane Services CC, was incorporated on 3 November 1998. This
CC was converted
into a company on 12 January 2006.
[4]
On 23 October 2007 a document was brought into being which bore the
masthead: ‘Masibuyisane
Services CC’. It stated:
‘
The
members of Masibuyisane Services Close Corporation (1998/06325/23)
hereby confirm that by resolution taken on Thursday 23 October
2007.
Joseph Vusi Motha … is authorised to sign all documents in
connection with the above company’.
It
is notable that this memorial of the resolution referred to ‘the
above company’ although what is earlier described
is a CC not a
company. The author ostensibly was comfortable by using such terms
interchangeably. It is signed by three individuals.
The first is Mr
Andries Maseko, who plays a major role in the unfolding saga, not
least as the deponent to the founding affidavit
and replying
affidavit in the rescission application. The second signatory is Mr
Eric Nkosi. The third is Mr Joseph Motha, since
deceased, the person
who was authorised to sign the documents. Each is described
identically as ‘Member Masibuyisane’.
It is common cause
that all three were members of the CC and subsequently members and
directors of Masibuyisane Services (Pty)
Ltd.
[5]
Maze Products (Pty) Ltd (Maze), was the principal debtor in a
contract styled ‘Full
Maintenance Leasing Master Agreement’.
Its terms are unimportant to the controversy. Two suretyships are
concluded for the
benefit of Maze.  One was given by two
individuals, Mr Zenzo Khanye and Ms Stenny Winifred Mathe.  The
other was given
by ‘Masibuyisane CC’.
[6]
The suretyship by Masibuyisane CC was given on the same day as the
resolution referred
to above. The document is a template containing
standard contractual terms, with blanks for the contracting parties
to fill in
details. The contracting party qua surety was described as
‘Masibuyisane CC’ of ‘35 Botha Avenue Witbank’.

It is signed by Mr Motha. Among the several standard terms is clause
16, which chooses a domicilium citandi et excutandi at the
address
given in the document, ie 35 Botha Avenue Witbank. Notably, on 23
October 2007, the form of the appellant was that of a
company and not
a CC.
[7]
On 20 August 2009 Masibuyisane (Pty) Ltd re-converted itself into a
CC.
On
5 July 2013 Masibuyisane CC re-re-converted itself into a company.
[8]
On 6 May 2014 Eqstra sued Maze and its sureties.  Eqstra cites
‘Masibuyisane
CC’ as the fourth defendant. On 15 May
2014, service was effected on the domicilium stated in the
suretyship. The sheriff
tacked the summons to the principal door.
[9]
On 11 June 2014, Eqstra made the first attempt to secure a default
judgment. The registrar
referred it to open court and judgment was
granted on 22 September 2014. The order described the fourth
defendant as ‘Masibuyisane
CC’.
[10]
The writ of execution subsequently issued, dated 7 October 2014,
describes the party to be served
as ‘Masibuyisane CC’.
The sheriff issued a nulla bona return of service dated 3 November
2014. In the return, it is
stated that it was served at 35 Botha
Avenue Witbank and that it was served on ‘Mr Maseko.’ The
sheriff recorded that
he was told that the ‘Business has
changed to Masibuyisane (Pty) Ltd’.
[11]
On 14 April 2016, the writ was re-issued. It now directed the sheriff
to execute on ‘Masibuyisane
(Pty) Ltd’. No evidence of
its fate is on record.
[12]
On 3 May 2018, the writ was again re-issued. The party stated to be
subject to execution was
now described as ‘Masibuyisane (Pty)
Ltd, (previously Masibuyisane CC)’. The execution of the writ
was effected.
[13]
In response, the appellant launched a rescission application on 30
May 2018.
The statutory
framework concerning conversions
[14]
The legislation concerning the conversion of corporate identity
includes the Close Corporations
Act 69 of 1984 (CC Act), the
Companies Act 61 of 1973 (1973 Companies Act) and the Companies Act
71 of 2008 (2008
Companies Act). These
statutes regulate the manner
and legal consequences of conversions by a CC into a company and vice
versa. The corresponding provisions
in the relevant statutes
addressing conversion all reflect the singularity of juristic
personality and the absence of any multiple
identities in consequence
of a conversion one way or the other. The relevant provisions are
these:
(a)
Section 2(2) of the CC Act, which reads:
‘
A
corporation formed in accordance with the provisions of this Act is
on registration in terms of those provisions a juristic person
and
continues, subject to the provisions of this Act, to exist as a
juristic person notwithstanding changes in its membership,
or its
conversion to a company in terms of Schedule 2 of the
Companies Act,
until
it is deregistered or dissolved –
(a)
in
terms of this Act; or
(b)
in
terms of the
Companies Act, in
the case of a juristic person that has
been converted to a company.
’
(b)
Section 29D(1) of the 1973
Companies Act, which
reads :
‘
(a)
On
the registration of a company converted from a close corporation, all
the assets, liabilities, rights and obligations of the
corporation
shall vest in the company.
(b)
Any
legal proceedings instituted before the registration by or against
the corporation, may be continued by or against the company,
and any
other thing done by or in respect of the corporation, shall be deemed
to have been done by or in respect of the company.
(c)
The
juristic person which existed as a close corporation before the
conversion shall notwithstanding the conversion continue to
exist as
a juristic person, but in the form of a company.’
(c)
Item 2(2) of Schedule 2 of the 2008
Companies Act, which
reads:
‘
On
the registration of a company converted from a close corporation –
(a)
the
juristic person that existed as a close corporation before the
conversion continues to exist as a juristic person, but in the
form
of a company’.
The validity of
the suretyship
[15]
On appeal before us, it was fairly conceded on behalf of the
appellant that if the suretyship
was held to be valid the appellant’s
case collapsed. It is therefore appropriate to dispose of this issue
at the outset.
[16]
The critical propositions advanced on behalf the appellant were
articulated thus:
(a) Although a
single juristic person indeed continues to exist throughout when a CC
converts into a company, the
form
of that juristic person
carries paramount significance as regards its dealings in contract.
(b) Conversion of a
CC into a company extinguishes the CC’s existence.
(c)
Accordingly, a contract describing a contracting party as a CC when
the CC no longer exists is invalid and unenforceable against
the
company.
[17]
It is plain that these contentions are self-contradictory and lack
cogency, as is illustrated
hereafter.
The judgment a
quo
[18]
Unterhalter J, after considering the statutory provisions, held thus:
‘
The
language and purpose of these provisions is to my mind clear. The
conversion of a close corporation into a company does not
bring into
existence a different juristic person. The same juristic person
continues, but simply in another form, now as a company
rather than
as a close corporation. The question that arises in this matter is
whether the juristic person that had the form of
a company could
undertake the suretyship obligation when it signed the suretyship and
provided a resolution in the name of the
close corporation from which
it had been converted. In my view the suretyship binds the company.
The juristic person that is undertaking
the obligations of the
suretyship is not a different person, it is the same person but
simply in a different corporate form. When
the resolution was given
by a member of Masibuyisane Services CC in order to enter the
suretyship and when Mr Motha then signed
the suretyship he acts to
bind the very entity that does exist, that is to say the company,
even though they are giving expression
to their agreement in the
corporate form of a close corporation, that is now in the corporate
form of a company. That does not
prevent the same juristic person
from assuming the obligations of the suretyship simply because the
assent to be bound is given
in the form of a close corporation rather
than a company, which close corporation has been converted into a
company.’
[19]
This conclusion was reached in the face of a contention, on behalf of
the appellant, that the
decision in
Townsend
Productions (Pty) Ltd v Leech and Others
[1]
was authority for the proposition that a CC and a company were two
distinct persons and that, in consequence, the suretyship concluded

under the circumstances described, was with a non-existent person.
The facts in
Townsend
were that an employer had concluded restraint of trade agreements
with two employees. The first restraint was concluded at a time
when
the employer was a company. Thereafter it was converted into a CC. A
second restraint agreement was concluded with another
employee
thereafter in a document which nevertheless incorrectly described the
employer as a company. The first restraint was held
to be valid
because of s 29D(1)
(b)
of
the 1973
Companies Act, which
provides that whatever was done prior
to conversion remains binding. The second restraint was held to have
been concluded with
a ‘non-existent’ company and was
invalid.
[20]
The passage in
Townsend
relied on by the appellant is at
45F-46B:
‘
Mr
Dickerson's
further
argument that para
(c)
[i.e.
s 29D(1)
(c)
of the 1973
Companies Act] perpetuates
the existence of the same
legal entity, only under a different name, cannot be sustained.
In
Mörsner
v Len
1992
(3) SA 626 (A)
it
is made clear that the
Close Corporations Act 69 of 1984
“het
'n nuwe soort regspersoon daargestel”
[2]
(at 631A). The purpose of the insertion of
s 29D
into the Act was to
provide continuity where one kind of juridical person is converted
into another kind of juridical person:
“
Juis
omdat 'n ander soort regspersoon (met die onderskeidende kenmerke
waarop reeds gewys is) in die lewe geroep is, was dit nodig ter

wille van kontinuïteit om die bepalings van art 29D(1) tot die
Maatskappywet by te voeg.”
[3]
(
Mörsner
v Len (supra
at 631H).)
The
very provision for continuity reinforces the distinctive identity of
the juridical persons.
The
restraint relied upon by the applicant is,
ex facie
the
written instrument in which it is embodied, a restraint in favour of
a legal entity which is not the applicant.
The
applicant's claim against the second respondent accordingly falls to
be dismissed on the ground that the applicant has failed
to prove
that the second respondent is in breach of a restraint agreement
between herself and the applicant’.
[21]
In response, Unterhalter J thereupon stated:
‘
.
. . [the judgment in
Townsend
]
understands [ss 29D(1)
(b)
and
29(1) of the 1973
Companies Act] to
indicate that there are
distinctive juristic persons that come about upon the conversion from
a close corporation into a company
or vice versa. That interpretation
of the relevant provisions of the
Companies Act does
not, with
respect, appear to me to be correct. The very same entity continues
to exist. The form of the entity, as the language,
makes plain in
section 29D[(1)]
(c)
,
changes, but the entity that is capable of undertaking obligations is
the same. Insofar as the
Townsend
decision comes to a different view as to the consequences of
conversion, I am in respectful disagreement . . . Mr Heyns . . . for

the applicant, stressed the language in
s 29D[(1)]
(c)
:
“But in the form of a company”. That language, however,
does not seem to me to alter the essential point which is
this:
a
juristic person that has a continued existence may assume an
obligation even when the expression which is given to the assumption

of that obligation takes place in the form of a now superseded CC
.’
(Emphasis added.)
[22]
I agree with the view taken by Unterhalter J.
[23]
The passage in
Townsend
itself invokes the earlier authority of
M
ö
rsner
v Len
[4]
for
the proposition that the function of s 29D of the 1973
Companies Act
is
to acknowledge that there are two distinct juristic entities and
that precisely because of that material difference between a CC
and
company, statutory intervention was necessary to provide
‘continuity’.
[24]
However, in my view, read correctly
,
M
ö
rsner
does not
support what is stated in
Townsend
nor does it support the appellant’s case. The
causus
belli
in
M
ö
rsner
was
the proper meaning of a clause in an agreement of sale of an interest
in a CC. Control of the CC was transferred before full
payment had
been made. The seller had cancelled the agreement alleging a breach
of its clause 10, which provides:
‘
Die
partye plaas op rekord dat die koper nie die reg sal hê om
sy belang in die beslote korporasie, wat hiermee verkoop
word,
te vervreem of te verpand of te sedeer of op enige ander wyse daarvan
ontslae te raak tensy die verkoper skriftelik toestemming
daartoe gee
of tensy hy die verkoper uitbetaal, welke toestemming in geen geval
onredelik weerhou sal word nie.
’
[5]
[25]
What was the breach? The buyer converted the CC into a company
without the seller’s consent
and gave 49 per cent of the shares
to a stranger.
[26]
The Court held this conduct did breach clause 10, whose function, it
was held, was to preserve
the
merx
(i.e. the member’s
interest in the CC) until full payment was made. In addressing this
controversy, at 631A-I, the Court
also described the legislative
scheme of the
Close Corporations Act. It
held thus:
‘
Die
Wet op Beslote Korporasies 69 van 1984 het 'n nuwe soort regspersoon
daargestel. Die doelstelling was om 'n eenvoudiger en goedkoper

ondernemingsentiteit in die lewe te roep. Daardeur sou klein
besighede die voordele van regspersoonlikheid kon geniet sonder dat

hulle aan die ingewikkelde voorskrifte van die Maatskappywet 61 van
1973 hoef te voldoen. Sekere kenmerke is tipies van en eie
aan 'n
beslote korporasie. Om maar net enkeles te noem. Minimale
formaliteit geld vir die administrasie en bedryf van 'n beslote

korporasie. Soos wel bekend, word aandele nie uitgereik en geen
aandeelkapitaal vereis nie. Alle lede het gelyke seggenskap in
die
bestuur en geen voorsiening vir die aanstelling van direkteure word
gemaak nie. Die rekenkundige- en openbaarmakingsverpligtinge
is in
die geval van 'n beslote korporasie minder omvangryk.
Die
betekenis en omvang van klousule 10 moet aan die hand van die
appellant se optrede, en teen die agtergrond van hierdie kenmerkende

verskille, bepaal word. Die bewoording van hierdie bepaling kon
nouliks meer omvattend gewees het. Die sinsnede 'ontslae te raak’

behels enige handeling waardeur die beheer en besit van die
koopsaak permanent ontneem word: vanselfsprekend sluit dit dan
die
tot niet maak daarvan ook in. Die oogmerk was heel duidelik om
die
merx
te bewaar - deur
inter
alia
ontdoening daarvan te belet - totdat die prys betaal
is.
Vir
die stelling dat die omskepping van die beslote korporasie in 'n
maatskappy nie deur klousule 10 verbied word nie, het die appellant

op arts 29C(1) and 29D(1) van die Maatskappywet gesteun.
Eersgenoemde artikel maak voorsiening vir sodanige omskepping.
Artikel
29D(1) :… aldus die betoog, dui aan dat so 'n
omskepping nie van wesenlike belang is nie en dat so 'n vervorming
dus nie
deur die verbod in klousule 10 getref word nie. Maar hulle is
eerder bewys tot die teendeel. Juis omdat 'n ander soort
regspersoon
(met die onderskeidende kenmerke waarop reeds gewys is)
in die lewe geroep is, was dit nodig ter wille van kontinuïteit
om
die bepalings van art 29D(1) tot die Maatskappywet by te voeg.
Daar
kan dus met sekerheid gesê word dat die omskepping van die
beslote korporasie in 'n maatskappy sonder toestemming (of
betaling
van die koopprys) deur klousule 10 belet word.’
[6]
[27]
Can these dicta support the conclusion in
Townsend
?
In my view, they cannot. Much of what that Court stated about a CC
being a new sort of legal persona was related to the uncontroversial

fact that the legislation intended two materially distinctive types
of juristic entity to exist.  However, that does not support
a
conclusion that upon conversion, a new persona is conceived
.
The
reason why the court was at pains to describe the different
characteristics of a CC and a company was to demonstrate that the

alienation of the interest in the CC that had been sold extinguished
the
merx
and replaced it with a shareholding unlinked to the seller; plainly,
an act which was incompatible with the terms of clause 10
of their
agreement. In
Townsend
,
the reading of
M
ö
rsner
was incorrect.
[28]
In argument on appeal, in addition to the unhelpful reliance on
Townsend
and the misreading of
M
ö
rsner
,
the decision in
Brodsky
Trading 224 CC v Cronimet Chrome Mining SA (Pty) Ltd and Others
[2016]
ZASCA 175
;
2017 (4) SA 610
(SCA) was offered as a precedent for the
appellant’s key contention. However, that contention, too, is
misplaced.
[29]
The controversy in
Brodsky
was whether the business had
complied with the Estate Agency Affairs Act 112 of 1976 to have a
valid current fidelity certificate
entitling it to trade. Section 26
of that statute forbade trading by any person without a valid
certificate:
‘
26.
Prohibition
of rendering of services as estate agent in certain circumstances
No person shall
perform any act as an estate agent unless a valid fidelity fund
certificate has been issued to him or her and to
every person
employed by him or her as an estate agent and, if such person is­
–
(a)
a company, to
every director of that company; or
(b)
a close
corporation, to every member referred to in paragraph
(b)
of the definition of “estate agent” of the corporation.’
[30]
The relevant facts in
Brodsky
were that although a certificate had been issued for 2005 to the
company, when the conversion to a CC took place in March 2006,
no
certificate was issued by the Estate Agency Board for 2006, and in
2007 a certificate was issued in the name of the company
and its
directors despite the fact that the company had already been
converted to a CC, the result of which was that no certificate
had
been issued in the name of the CC or in the names of its members.
[31]
The object of the analysis conducted by the Court in
Brodsky
was, therefore, to address the application of the provisions of the
Estate Agency Affairs Act. The litigation had been triggered
when an
estate agency business located in a CC had been sold. The sale was
repudiated and cancelled on the basis that the
merx
,
i.e. the business, could not lawfully trade as an estate agency
because it had not been issued with a certificate by the Estate

Agency Board to entitle it to do so. The defence proffered was that a
certificate had been issued but, in error, the certificate
was
applied for at a time when the company had converted to a CC but the
form of application was styled a company, its former guise
and the
certificate obtained misdescribed it.
[32]
It was held that this did not overcome the peremptory requirements of
the Estate Agency Affairs
Act. The Court stated that the ‘company
did not exist’ and a certificate in the company’s name
was null and void.
These remarks must be understood in that context,
i.e. the effect of the provisions of the Estate Agency Affairs Act.

The Court, at paras 20 to 22 stated as follows (all
allusions therein to ‘the Act’ are references to the
Estate Agency
Affairs Act):
‘
[20]
Section 16(4) provides that no certificate shall be issued unless and
until the provisions of the Act are complied with. As
from the date
of conversion, being 20 March 2006, the company no longer existed.
When the application was made for a renewal of
the certificates in
2007, it must have been made in the name of the company, because Mr
Maree conceded that he had not told the
Board of the conversion. The
application was accordingly made by a non­existent company,
Brodsky Trading 224 (Pty) Ltd, which
no longer qualified as an
“estate agent” in terms of the Act. The certificate
therefore purported to certify compliance
with the requirements of
the Act by a non­existent company, in the guise of an “estate
agent”.
[21] Section 16(4)
of the Act provides that any certificate issued in contravention of
the Act shall be invalid. The issue of the
certificate to the
non­existent company was accordingly invalid. In addition, the
issue of a certificate to Mr Maree in his
capacity as a director of
the non-­existent company, and not in his capacity as a member of
the appellant, did not comply with
s 16 of the Act and was also
invalid. In terms of s 26 of the Act, every director of a company and
every member of a close corporation,
is required to have a valid
certificate. In their absence the company or close corporation
concerned is not entitled to receive
any remuneration in terms of s
34A of the Act. On this additional ground the appellant is precluded
from recovering any remuneration.
[22]
This is not simply an issue of nomenclature, or a misdescription in
the name of the certificate holder, but one of substance.
The
objectives of the Act are not fulfilled by the issue of invalid
certificates by the Board as they play a central role in ensuring

that estate agents comply with its provisions. There was accordingly
no basis for the court a quo to conclude that the appellant
had
substantially complied with its requirements
.
’
[33]
The problem presented in this matter is quite different. In addition
to the traverse of the common
cause facts set out above, it must be
noted that important information to explain why the resolution and
the suretyship alluded
to the CC when the persons responsible for
creating the documents knew full well that the CC had been converted
into a company
were not put on record. Indeed, it is plain that the
rationale for that conduct has been deliberately obscured. That is
apparent
in two respects.
[34]
In seeking rescission, Mr Maseko, who could have explained all,
refrained from telling the court
anything useful. First, he omitted
to disclose that he had personally met the sheriff when the initial
writ was presented in 2014
and chose to assert that the first the
appellant
knew
of the judgment was in 2018. This statement is a dissembling sleight
of hand. The appellant’s counsel, in a valiant effort
to guard
his honour, was driven to contend that although Mr Maseko knew the
appellant company did not know
,
because as at the time, Mr Maseko was not acting for the company when
he engaged the sheriff. This simply cannot be cogent.
[35]
Similarly, in the second respect, Mr Maseko denied the authority of
Mr Motha to sign the suretyship
of behalf of the company and omitted
to disclose the resolution which alludes to both the CC and the
company interchangeably.
These facts were only put on record in
the answering affidavit to rebut the denial of knowledge of the order
and the denial of
authority to conclude the suretyship set out in the
founding affidavit. In reply, despite an opportunity to explain,
these revelations
were ignored.
[36]
Therefore, bereft of a proper account of what happened, an
explanation for why the appellant’s
directors acted as they did
on 23 October 2007 must be inferred from the known facts. The most
generous interpretation of the facts
suggests that the directors of
the company, Mr Maseko and the others, were slack in their paperwork
and either they, or an unenlightened
staff member, drew the documents
which they then signed without due care to precision of thought or of
word. Thus, the upshot is
that they made a mistake. Their mistake
does not matter much because the statutes make provision for an
absolute absence of any
hiatus or interruption of juristic
personality upon conversions one way or the other.
[37]
The emphasis in argument on behalf of the appellant on the form of
the corporate identity as
having the effect of immunising a
particular juristic person from accountability for its acts, when
erroneously draping itself
with the mantle of its former corporate
guise, is wholly unmeritorious.  There can be only one, and
whichever cloak is donned,
the person within remains extant. The
singularity of identity is nowhere more trenchantly stamped on the
appellant, despite its
several incarnations, than by the fact that
the tax number and the VAT number of the business remained unchanged
throughout all
these years, a fact usefully put on record by the
appellant itself when it attached the CIPRO records of the corporate
changes.
Moreover, the P O Box address remained the same. The
physical address too, remained ‘35 Botha Avenue’ save for
a rather
odd change, perhaps more apparent than real, when in 2006,
it was briefly ‘35 President Street’, but without a
change
of postcode.
Conclusions
[38]
Accordingly,
(1)
The
juristic persona remains the same regardless of the corporate form
upon conversion from CC to company or vice versa.
(2)
An
incorrect description of the juristic persona is not a ground to
compromise a contract concluded between it and another person.
(3)
The
suretyship is valid and enforceable.
[39]
The contention that the order a quo had been in error, within the
contemplation of rule 42(1)(a)
of the Uniform Rules of Court, on the
grounds that the ‘defendant’ did not exist, axiomatically
evaporates.
[40]
The attempt to bring a case within the bounds of rule 31(2)(b) on the
grounds that the appellant
learnt of the judgment after the fact, is
scuttled by two issues. First, the application is out of time because
the Appellant’s
director, Mr Maseko had knowledge of the order
in November 2014, not only in 2018 upon the effective service of the
writ of execution.
It must follow that the appellant too had
knowledge at that time in 2014 because to suggest a director could
have knowledge in
a ‘private capacity’ and the company
did not thereby become aware is an unsustainable contention. Second,
even ignoring
that quibble, the appellant’s defence of not
being bound by the suretyship fails, as addressed above.
[41]
The service of the summons on the domicilium stipulated in the
suretyship is not denied. Service
was, therefore, effective.
[42]
No reason exists to rescind the order.
The Order
[43]
The appeal is dismissed with costs.
_______________________
ROLAND SUTHERLAND
ACTING JUDGE OF
APPEAL
Appearances:
For
appellant:
G F Heyns SC
Instructed
by:
Krügel Heinsen Incorporated, Witbank
Phatshoane
Henney Attorneys, Bloemfontein
For
respondent:
C J Bresler
Instructed
by:
Bouwer & Olivier Incorporated,
Randburg
Symington
De Kok Attorneys, Bloemfontein.
[1]
Townsend
Productions (Pty) Ltd v Leech and Others
2001
(4) SA 33 (C); [2001] 2 All SA 255 (C).
[2]
In
translation: ‘establish a new sort of juristic person’.
(My translation.)
[3]
In
translation: ‘precisely because a different sort of juristic
person (with the distinguishing characteristics to which
reference
has already been made) it was necessary, in the interests of
continuity, to include the provisions of section 29D(1)
to the
Companies Act.’ (My
translation.)
[4]
M
ö
rsner
v Len
1992
(3) SA 626 (A); [1992] 2 All SA 57 (A).
[5]
In
translation
‘
The
parties place on record that the purchaser shall not have the right
to alienate or to pledge or to cede or in any other way
to dispose
of his interest in the close corporation which is hereby sold,
unless the seller gives written permission thereto
or unless the
[the purchaser] pays out the seller, which permission shall in no
circumstances be unreasonably withheld.’
(My translation.)
[6]
In
translation
:
‘
The
Close Corporations Act 69 of 1984
established a new type of juristic
person. The objective was to create a simpler and cheaper business
entity.  By such means,
small businesses could enjoy the
advantages of juristic personality without them having to comply
with the complex requirements
of the Companies Act 61 of 1973.
Certain features are typical of and exclusive to a close
corporation.  To name just
a few.  Minimal formalities
apply to the administration and operation of a close corporation.
As is well known, no
shares are issued, and no share capital is
required. All members have equal say in the management and no
provision is made for
the appointment of directors.  The
accounting and disclosure obligations in the case of a close
corporation are less extensive.
The meaning and
scope of clause 10 should be determined by the appellant’s
conduct and against the background of these distinguishing

characteristics. The wording of these provisions could hardly have
been more comprehensive.  The phrase ‘dispose of’

encompasses any transaction by which the control and possession of
the merx can be permanently alienated:  self-evidently,
it also
includes the extinguishing thereof.  The purpose was entirely
clear to preserve the
merx
– by inter alia forbidding
the extinction thereof – until the price was paid.
For the proposition
that the conversion of the close corporation into a company is not
prohibited by clause 10, the appellant
placed reliance on section
29C(1) and 29D(1) of the Companies Act.  The first mentioned
section provides for such conversion.
Section 29D(1)…
So ran the
argument, indicates that such a conversion is not of material
importance and that such a transformation is not impacted
by the
prohibition in clause 10.  But rather, it is proof to the
contrary.  Precisely because another type of juristic
person
(with the distinguishing features already referred to) was brought
into being, it was necessary in the interests of continuity
to
include the provisions of section 29D(1) to the Companies Act.
It can thus be said
with certainty that the transformation of the close corporation into
a company without permission (or payment
of the purchase price) is
prohibited by clause 10.’ (My translation.)