SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document
in compliance with the law and SAFLII Policy
IN THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE DIVISION – MAKHANDA)
[Not Reportable]
Case No.: 2521/2022
In the matter between:
CHARALAMBOS COMMERCIAL PROPERTIES CC
(Registration Number: 2005/117681/23)
and Applicant
TRANSKEI FURNISHERS (PTY) LTD
(Registration Number: 1970/008903/07) First Respondent
FIRSTRAND BANK LIMITED Second Respondent
REGISTRAR OF DEEDS, MTHATHA Third Respondent
JUDGMENT
ROBERSON J:
Introduction
[1] On 21 August 2015, the applicant, as lessee, entered into a notarial agreement
of lease (the lease) with the first respondent, as lessor. The property leased
was Erf 4 [...] (Portion of Erf 2 [...]) Mount Frere, Umzimvubu Municipality, di strict
of Kwa Baca, Province of the Eastern Cape (the property). The lease was for a
duration of thirty years, commencing 1 November 2014, with an option to renew
for a further thirty years. The rent payable was R14 520.56 per month,
escalating annually by 8%. The lease contained an option for the applicant to
purchase the property, which option the applicant exercised. In this application
the applicant seeks an order declaring that it validly exercised its option The
applicant further seeks an order di recting the first respondent to sign, within ten
days of service of the order, the agreement of sale of the property. Should the
first respondent not sign the agreement of sale, an order is sought authorising
the Sheriff of this Court to sign the agreemen t of sale and all other documents
necessary in order to effect transfer of the property.
[2] In the conclusion of the lease, the applicant was represented by Mr
Charalambos Christodoulou, and the first respondent was represented by Mrs
Nozibele Vakalisa. It i s common cause that at the time of the conclusion of the
lease, Mrs Vakalisa was the only director of the first respondent, whereas the
articles of association provide for not less than two directors.
[3] Clause 19 of the lease contained the option to purchase and provided as
follows:
The Landlord hereby grants the Tenant an irrevocable option to purchase the
Property (“the Option”) subject to the following terms and conditions:
9.1 The Option shall be capable of being exercised by the tenant upon the
death of NOZIBELE DORIS VAKALISA (Identity Number: 3[...]) and the
Tenant shall have a period of 30 (THIRTY) days, calculated from the
date of her death, to exercise the Option, b y delivering a written notice
to NOZIBELE DORIS VAKALISA’S Executor.
9.2 The price to be paid by the Tenant for the Property shall be the sum of
R1 400 000.00 [ONE MILLION FOUR HUNDRED THOUSAND RAND]
plus escalation equal to the average rate of the Consumer Price Index (as
published by the Department of Statistics South Africa ) per year,
calculated from the year of signature hereof to the year of exercise of the
said option.
9.3 The Parties undertake to do all things necessary to formalize this option
agreement in writing, which agreement will contain the usual terms and
conditions associated with an agreement of sale in respect of immovable
property.
[4] The opposition to the application is essentially based on a challenge to Mrs
Vakalisa’s authority to enter into the lease on behalf of the first respondent.
Evidence
[5] Mr Christodoulou deposed to the founding affidavit. It appears from the
authority to institute the application that he is a trustee of the Twin Angels
Trust, which is the sole member of the applicant.
[6] Although contained in the replying affidavit, it is useful to include at this point,
for chronological purposes, Mr Christodoulou’s account of events leading to the
conclusion of the lease. During September 2014 the first res pondent had two
directors, Mrs Vakalisa and Mr Tobile Melani. On 16 September 2014 the first
respondent passed a resolution in terms of which Mrs Vakalisa was authorised
to conclude a notarial lease subject to the reregistration of the first respondent.
A copy of this resolution was annexed to the replying affidavit. It bore the name
of the first respondent, was signed by both directors and recorded as follows:
“Resolved that Nozibele Doris Vakalisa, a director of the Company is
hereby authorised to ente r into a Notarial Head Lease on behalf of the
Company, subject to the Company being reinstated with the
Companies and Intellectual Property Commission.”
[7] On 14 August 2015, after the first respondent’s reinstatement, Mrs Vakalisa
signed a power of attorney in favour of specified persons to appear before a
notary public for the purpose of executing the lease, a draft of which was
attached to the power of attorney. These documents were also annexed to the
replying affidavit. The notary public, Mr Marc Sharra tt, explained to Mrs
Vakalisa the consequences of the lease. Mr Anthony Lawrence was also
present. Mr Sharratt and Mr Lawrence deposed to confirmatory affidavits.
[8] Mr Christodoulou stated that Mrs Vakalisa resigned as a director of the first
respondent on 1 June 2020 and on that day Mr Chuma Unathi Vakalisa and Mr
Pierre Mandisile Vakalisa were appointed as directors. To avoid confusion
because of the same surname, and with no disrespect, I shall refer to them as
Chuma and Mandisile respectively. Chuma i s the son of Mrs Vakalisa and
Mandisile is the grandson of Mrs Vakalisa’s late husband, Mr Sandile Acton
Vakalisa. Again, with no disrespect, I shall refer to him as Sandile. Sandile
died intestate on 27 April 1988 and Mrs Vakalisa was appointed as estat e
representa tive. I mention here that at the time of his death Sandile was the
sole shareholder in the first respondent.
[9] Mrs Vakalisa died on 23 January 2022 and Chuma was appointed by the
Master of the High Court as the representative of her estate. T he applicant
gave notice of its election to exercise the option to the first respondent, to
Chuma and to Mandisile. Thereafter the applicant’s attorneys presented the
agreement of sale to the first respondent for signature. The purchase price of
R1 872 8 97.00 was calculated by Mr Johan Riekert, a chartered accountant.
This sum has been deposited into the trust account of the applicant’s attorneys,
and the applicant tendered payment to the first respondent as due
consideration for the property.
[10] According to Mr Christodoulou, correspondence from Mandisile indicated that
he did not recognise the lease and consequently disputed the option to
purchase. Correspondence from Mandisile was annexed to the founding
affidavit. In a letter dated 28 January 2022 Mand isile said that the directors of
the first respondent and the heirs in Sandile’s estate, of which Mrs Vakalisa
was the executor, had instructed the first respondent’s attorneys to contest the
validity of the lease and in particular the option to purchase c lause. On 17
February 2022, in response to the notice of intention to exercise the option,
Mandis ile maintained the challenge to the lease. In an email sent on 24 May
2022 to the conveyancer appointed to attend to the transfer of the property,
Mandisile stated that the first respondent was not selling the property and was
not bound by the lease. In a letter addressed to the attorney who prepared the
agreement of sale, Mandisile repeated the first respondent’s stance.
Accusations were made of unscrupulou s conduct, thievery, thuggery and
greedy ambitions. The purchase price was also challenged, Mandisile stating
that the municipal valuation of the property was R5.4 million.
[11] Mr Christodoulou referred to a tripartite agreement between the applicant, the
first respondent and the second respondent (First Rand) in terms of which, inter
alia, First Rand agreed to advance a loan to the applicant, and the first
respondent bound itself together with the applicant as surety and co -principal
debtor in favour of First Rand. The loan was to be released to the applicant on
registration of a mortgage bond. The lease bears an endorsement to the effect
that it is mortgaged for R10 million. Clause 5 of the lease provides that if the
applicant wished to mortgage the lease in favour of a bank in order to raise the
capital required to finance any development and refurbishment of the buildings,
the first respondent consented to such mortgage.
[12] Mr Christodoulou said that the applicant had complied with its obligations in
terms o f the lease.
[13] The chartered accountant Mr Riekert deposed to a confirmatory affidavit.
[14] Mandisile deposed to the first respondent’s answering affidavit. As
foreshadowed in his correspondence, he denied that the option was validly
granted. He said that when he heard of the potential sale of the property in
2014, he confronted Mr Christodoulou and told him that any sale would be
resisted. Clause 19, so he stated, was the result of the earlier sale
negotiations. He was excluded when the lease was concluded.
[15] Mandisile recounted some history of the first respondent. In 1980 the property
described as the Remainder of Erf 2[...] Mount Frere (Erf 2[...]) was granted to
the first respondent. Sandile was the shareholder and director of the first
respondent and ran a bus iness on this property. When he ceased trading, the
other buildings on this property were leased to other concerns and one
individual. Sandile sold various portions of Erf 2 [...] until eventually only Erf
4[...] remained and it is the first respondent’s only a sset.
[16] Mandisile referred to periods of deregistration of the first respondent, namely
August 1985 to July 2008, and 13 July 2009 to 21 October 2014. He also
related various allegedly unauthorised acts performed by Mrs Vakalisa on
behalf of the first respo ndent when she was not a director, or was purporting to
act as sole director, when the articles of association of the first respondent
provide that there be not less than two directors. In 1993 she sold a portion of
Erf 2[...] when her only authority was her appointment as the representative of
Sandile’s estate. In 1995 she concluded a notarial deed of lease of the
Remainder of Erf 2[...], Mount Frere, with one of Mr Christodoulou’s associated
close corporations, C & Y Comdev CC, when the first respondent was
deregistered and she had not been appointed as a director. In 2006 she
cancelled this notarial lease and entered into a second notarial lease of the
Remainder of Erf 2 [...], Mount Frere with another of Mr Christodoulou’s
associated close corporations, Mount F rere Commercial Properties CC.
Neither of these notarial leases contained an option to purchase clause.
[17] According to Mandisile, in 2008 the first respondent was reregistered to
facilitate the sale of a portion of Erf 2[...] to the Sparg Group and in terms of a
court order Mrs Vakalisa was appointed as a director. The court order, in the
form of a rule nisi, was published in a Government Gazette and annexed to the
answering affidavit. It reflected that the Registrar of Companies was ordered to
reregister t he first respondent, that Sandile was the sole shareholder of the first
respondent at the time of his death, that Mrs Vakalisa was recorded as the sole
shareholder in her capacity as administrator of Sandile’s estate and that she be
appointed as a director of the reregistered first respondent. Mandisile
maintained that this appointment as director was merely to facilitate the sale to
the Sparg Group.
[18] Mandisile said that his investigations revealed that income earned by the first
respondent was deposited into Mrs Vakalisa’s personal bank account. He
alleged that the first respondent was simply a shell for use by Sandile, and then
Mrs Vakalisa, for their convenience and with no regard for its distinct legal
persona.
[19] Mandisile said that the notarial lea se concluded in 1995 provided for the lessee
at its own cost to develop the premises for the purpose of establishing a
shopping centre. A stamp on the lease indicated that it had been mortgaged
for R1 million and an additional R300 000.00. The notarial l ease concluded in
2006, so Mandisile stated, provided that the lessee could mortgage the lease to
obtain finance for the development and refurbishment of the building. This
lease bore the endorsement that it had been mortgaged for R2 million.
Mandisile a lleged that this amount was not used for the development and
refurbishment of the buildings and instead it was used to provide finance to
other entities associated with Mr Christodoulou.
[20] The current lease has been mortgaged for the sum of R10 million. Acc ording
to Mandisile there has been no development of the property, and he maintained
that the property has been used as a vehicle for raising finance most probably
for the benefit of the applicant and associated entities. Consequently, so
Mandisile allege d, the applicant was in breach of the current lease and had
commercially exploited the first respondent. The first respondent earns
R306 000.00 annually from the lease whereas the applicant earns in excess of
R2.1 million from sub -letting the property.
[21] Mandisile also said that he had learned that a further mortgage bond had been
executed for R9 500 000.00 to cover the applicant’s indebtedness to First
Rand, thereby hypothecating all right, title and interest in the leasehold rights of
the property.
[22] In elab orating on the alleged lack of authority on the part of Mrs Vakalisa,
Mandisile stated that during her lifetime she was a housewife, a teacher and a
nurse. She had no business experience and no knowledge of corporate
governance and the responsibilities of a director. She was not capable of
fulfilling her duties as estate representative or her fiduciary duties as a director
of the first respondent.
[23] In relation to the required number of directors of the first respondent Mandisile
said that Mr Melani had been appointed as a director in order to facilitate the
sale to the Sparg Group, and that he was removed as a director on 25 March
2015.
[24] Mandisile rai sed s 112 of the Companies Act 71 of 2008, ss (2) (a) of which
provides that a company may not dispose of all or a greater part of its assets
unless the disposal is approved by a special resolution of shareholders. He
said that the intestate heirs in Sand ile’s estate who are entitled to a child’s
share wish that the shareholding in the first respondent should be taken up by a
trust of which they would be the beneficiaries. He stated that while the heirs’
interest in the shareholding of the first responden t remains undetermined s 112
cannot be complied with.
[25] Mandisile further stated that if the first respondent had been a natural person
the option to purchase would have amounted to an impermissible pactum
successorium , being an irrevocable post -mortem dispo sition of property. The
linking of the option to purchase to the death of Mrs Vakalisa, so the view was
expressed, also undermined the essence of perpetual succession.
[26] Mandisile also raised s 42 (2) of the Administration of Estates Act 66 of 1965
which pr ovides that an executor who wishes to effect transfer of immovable
property in terms of a sale shall lodge a certificate from the Master to the effect
that there is no objection to the transfer.
[27] Mandisile anticipated that the applicant would rely on s 20 o f the Companies
Act (I assumed s 20 (7)), which in the present instance would prevent the first
respondent from asserting that the lease was void because Mrs Vakalisa was
the only director at the time of its conclusion. He countered such a position by
narrating the history of the relationship between Mrs Vakalisa and Mr
Christodoulou. He said that he believed that they were introduced to one
another in the early 1990’s by a close friend and business associate of Sandile.
Mr Christodoulou thus became awar e of Mrs Vakalisa’s personal
circumstances. Mandisile said he understood that it was as a result of
meetings between Mrs Vakalisa and Mr Christodoulou that the 1995 notarial
lease was concluded. It would have been clear to Mr Christodoulou, so it was
alleged, that the first respondent was a shell and the alter ego of Mrs Vakalisa,
particularly because the rent was paid into her personal bank account.
Mandisile said he understood that Mr Christodoulou was unhappy about the
sale to the Sparg Group, and on seeing Mrs Vakalisa’s ability to deal with the
assets of the first respondent as though they were her own, Mr Christodoulou
was able to negotiate the purchase of the property for around R1,4 million.
[28] Mandisile described the relationship between Mrs Vakali sa and Mr
Christodoulou as one of benevolence on the part of Mr Christodoulou, in that
he paid R100 000.00 as a contribution to her 75th birthday celebrations and that
she had been his dinner guest. He expressed the view that their dealings were
not at ar m’s length and that the benevolence of Mr Christodoulou was aimed at
“sweetening” the potential purchase of the property.
[29] Mandisile said he could say without fear of contradiction that all contracts and
documents (presumably involving Mrs Vakalisa) were drawn up by the
applicant or its corporate associates which were parties to the 1995 and 2006
leases and presented to Mrs Vakalisa fo r signature. She was never
professionally represented, and with no knowledge of her obligations as an
executrix or a director, had liquidated the majority of Sandile’s estate for her
personal benefit and that of her immediate family. He further alleged t hat Mrs
Vakalisa’s lack of authority, lack of understanding of her role, and lack of
professional advice applied equally to the tripartite agreement.
[30] In his replying affidavit Mr Christodoulou said that at the time of the conclusion
of the 1995 and 2006 no tarial leases, he was the sole member of the two
lessees. He was unaware that the first respondent was deregistered at the
time and had no knowledge of the first respondent’s internal affairs relevant to
the conclusion of transactions. He relied on Mrs Va kalisa’s representation that
she was authorised to act on behalf of the first respondent. He denied that her
appointment as a director in 2008 was limited as alleged.
[31] In response to the allegation that the rent was paid into Mrs Vakalisa’s personal
accoun t and that the first respondent was her alter ego , Mr Christodoulou said
he had no knowledge of the first respondent’s internal financial arrangements,
or that the first respondent did not function as a separate legal persona.
[32] Mr Christodoulou confirmed th at the applicant’s rights under the lease serve as
collateral security as required by its bankers. He said the applicant had
complied with its obligations and had never been served with a notice of
breach. He denied the allegation of commercial exploitat ion. With regard to
the rental income earned by the applicant from the property, he said that the
applicant was entitled to this because of the capital it had invested in the
property.
[33] With regard to the criticism of Mrs Vakalisa’s competence, he said sh e was
educated and competent to discharge her functions as a director of the first
respondent. She had also received legal advice prior to the conclusion of the
lease.
[34] Mr Christodoulou agreed that he had had a longstanding business and
personal relationsh ip with the Vakalisa family, and has on many occasions
financially assisted members of the family. The payment of R100 000.00 was
for financial assistance to Mrs Vakalisa at her request. Mr Christodoulou
denied having dinner with Mrs Vakalisa.
Discussio n
[35] The points concerning a pactum succ essorium and non -compliance with s 42
(2) of the Administration of Estates Act were not pursued
[36] The validity of the lease and Mrs Vakalisa’s authority were challenged on a
number of grounds.
[37] I deal firstly with the resolution of September 2014. On this date the first
respondent had not been re -registered. It was reregistered on 21 October
2014. Section 82 (4) of the Companies Act provides:
“If the Commission deregisters a company as contemplated in
subsection (3), any interested person may apply in the prescribed
manner and form to the Commission, to reinstate the registration of the
company.”
[38] In Newlands Surgical Clinic (Pty) Ltd v Penins ula Eye Clinic (Pty) Ltd 2015 (4)
SA 34 (SCA) at paragraph [29] Brand JA stated:
“As I see it, the wording of the section leaves no room for the pragmatic
approach adopted by the court a quo. The only meaning available on
that wording, as I see it, is that s 82(4) has automatic retrospective
effect, not only in revesting the company with its property but also in
validating its corporate activities during the period of its deregistration.”
[39] Mr Kincaid, who appeared for the first respondent, referred to parag raph [26] of
Newlands Surgical Clinic , where it was said that the retrospective validation of
corporate activities during the period of deregistration holds as a matter of
course the inherent risk of prejudice to third parties. Mr Kincaid submitted that
in the present matter the applicant was aware that the first respondent was
deregistered at the time of the resolution and most probably aware of the
breaches of fiduciary duties and corporate mismanagement on the part of Mrs
Vakalisa. Automatic retrospect ive reinstatement should not, so it was
submitted, be used to sanitise the series of invalid acts underpinning the
applicant’s contractual claim.
[40] There was no evidence that the applicant, through Mr Christodoulou, was
aware of the deregistration of the fi rst respondent at the time of the resolution,
or aware of the alleged breaches of fiduciary duties or corporate
mismanagement on the part of Mrs Vakalisa. In my view this submission does
not support a finding that the resolution was not validated by rereg istration.
[41] Mr Kincaid submitted that the judgment in Newlands Surgical Clinic may not be
settled law. He referred to the judgment in Aquila Steel v Minister of Mineral
Resources 2019 (3) SA 621 (CC) where, at paragraph [119], it was stated that
it was not necessary to consider the effect of the deregistration of one of the
respondent companies and whether the approach of the Supreme Court of
Appeal was correct. In the footnote t o this paragraph, it was recorded that prior
to the hearing the parties had been advised that they would be invited to make
submissions on whether the judgments in Newlands Surgical Clinic and
another matter, were compatible with certain judgments of the C onstitutional
Court. In the footnote Cameron J stated:
“It is unnecessary, for now, to determine whether Newlands and Palala
sufficiently recognise the distinction between retrospectivity and retroactivity
and whether they can stand in the light of Du Toi t and McBride .”
[42] Mr Kincaid submitted that there was an insinuation in the footnote which
supported the submission that Newlands Surgical Clinic was not settled law. I
do not agree. It is clear that no decision was made on the status of the
judgment in Newlands Surgical Clinic and in my view there was not even an
insinuation.
[43] Mr Kincaid submitted further that Mr Melani would not have anticipated a
situation where the lease was concluded when there was only one director of
the first respondent. He would have anticipated permissible conduct. In other
words, as I understand the submission, the resolution must be interpreted as
only authorising the conclusion of the lease if there were two directors at the
time of its conclusion. In my view such an i nterpretation is somewhat remote.
The resolution and the conclusion of the lease were two separate instances,
with their own legal requirements.
[44] It was also submitted that if Mr Melani had been aware that the two previous
notarial leases did not contain a n option to purchase clause, it could not be
inferred from the resolution that clause 19 would have been included in the
lease. The inclusion of an option to purchase clause in the lease, if envisaged,
should therefore have been expressed in the resolutio n. Mr Melani did not
depose to an affidavit in this application. One cannot speculate on what he
knew and what his thought processes would have been. As the resolution
stands, it does not prohibit the inclusion of an option to purchase clause.
[45] It was al so submitted that Mr Melani had signed a blank cheque, in that the
resolution did not name the other party to the lease or contain the terms of the
lease. In my view the resolution is sufficient to support the ultimate conclusion
of the lease. The proper ty was the only asset in the first respondent and the
property to be leased was therefore identifiable. The fact that the terms of the
lease or the name of the lessee were not included in the resolution does not in
my view undermine the authority given to Mrs Vakalisa in the resolution.
Further in this regard it was submitted that no director acting responsibly and in
accordance with his fiduciary obligations could have resolved that the first
respondent would be bound to a contract in terms of which the option could be
exercised on the happening of an arbitrary condition, namely the death of Mrs
Vakalisa. I do not find anything objectionable in the condition, and why it
should be considered differently from providing, for example, for a specific
calendar date for the exercise of the option. Mrs Vakalisa was involved with
the first respondent as a director and as the representative in Sandile’s estate,
which was the sole shareholder in the first respondent. The date of her death
would therefore not be an arbitrary condition, unlike the example given by Mr
Kincaid of the death of an employee of the first respondent such as the
messenger.
[46] I deal next with the submission on behalf of the respondent that s 112 and s
115 of the Companies Act had not been comp lied with, in circumstances where
the sole asset of the first respondent was to be disposed of. Section 112 (2) of
the Companies Act provides:
“A company may not dispose of all or the greater part of its assets or
undertaking unless -
(a) the disposal has bee n approved by a special resolution of the
shareholders, in accordance with section 115; and
(b) the company has satisfied all other requirements set out in section 115 ,
to the extent those requirements are applicable to such a disposal by
that company.”
It was submitted on behalf of the applicant that the principle of unanimous
consent was of application.
[47] In Gohlke and Schneider and Another v Westies MInerale (Edms) Bpk and
Another 1970 (2) SA 685 (A D) the following was stated at 693E -H:
“The articles, therefore, only empower a general meeting to appoint
directors to fill vacancies caused by retirement or removal of directors,
a situation which did not arise in the present case. I agree however
with M r. Coetzee that the members must have inherent or implied
general power to appoint directors to fill other vacancies caused, for
example, by resignation, death, incapacity, or disqualification. Usually,
as a matter of practice, they would exercise that pow er by ordinary
resolution at a general meeting. But the articles neither require that nor
prohibit the power from being exercised by their unanimous assent
achieved otherwise than at such a meeting. After all, the holding of a
general meeting is only the f ormal machinery for securing the assent of
members or the required majority of them, and, if the assent of all the
members is otherwise obtained, why should that not be just as
effective? Thus in the case of Salomon v Salomon and Co. Ltd ., 1897
A.C. 22, on e of the questions that arose was whether the agreement
whereby the company purchased the vendor's business was valid,
since there had been no independent board of directors to render the
company bound. No general meeting of members of the company had
been held to approve the agreement, but according to the evidence
they all knew of its terms and accepted them. At p. 57 Lord DAVEY
said:
'I think it an inevitable inference from the circumstances of the case
that every member of the company assented to the pu rchase, and the
company is bound in a matter intra vires by the unanimous agreement
of its members.'”
[48] In Levy and Others v Zalrut Investments (Pty) Ltd 1986 (4) SA 479 (W) at
485F the following was stated:
“I am hence of the opinion that the unanimous consent of the
shareholders of a company to a specific transaction has the same
effect and validity as the approval of such transaction by a general
meeting of the company.”
[49] And in Moraitis Investments v Montic Dairy 2017 (5) SA 508 (SCA) at
paragra ph [37] Wallis JA stated (footnote omitted):
“The purpose underpinning the requirements of ss 112 and 115 is to
ensure that the interests and views of all shareholders are taken into
account before the company disposes of the whole or the greater part
of its assets or the undertaking itself. In the c ase of a special resolution
ss 65(9) and (10) stipulate the majority that must be achieved for such
a resolution to be passed. Where the company only has a single
shareholder these requirements become a mere formality. In those
circumstances it seems to me that the principle of unanimous consent
can be invoked in answer to the appellants’ contention. That principle,
long recognised in English company law, from which our courts have
received much guidance, was accepted as part of our law relating to
companie s, under both the 1926 and the 1973 Companies Acts. I can
see nothing in the current Act to suggest that the principle no longer
finds application. The problems that this court identified in Quadrangle
Investments and those identified by Professor Beuthin in his article on
the topic do not arise here to preclude the invocation of the principle.”
[50] On behalf of the applicant, several factors were relied upon to support the
application of the principle of unanimous consent. At the time of the conclusion
of the lease, Mrs Vakalisa was the representative of Sandile’s estate, which
was the sole shareholder of the first respondent. The control over the
shareholding vested in Mrs Vakalisa in her capacity as representative of the
estate. In terms of the 2008 c ourt order (see paragraph [17] above, Mrs
Vakalisa was recorded as the sole shareholder of the first respondent in her
capacity as representative of the estate. When the resolution of 2014 was
taken, Mrs Vakalisa was at the time the sole shareholder of th e first respondent
in her representative capacity. Mrs Vakalisa signed the power of attorney for
the execution of the lease. It was submitted that these factors left no doubt that
Mrs Vakalisa, the sole shareholder in her representative capacity, approve d of
the sale of the property. In view of the authorities referred to and the facts, I
am of the view that the principle of unanimous consent finds application and
that the disposal of the sole asset of the first respondent was properly
approved.
[51] The respondent’s difficulty with unanimous consent appears to be the interests
of future shareholders. Reference was made to an article in the 1974 South
African Law Journal Volume 1 at page 2 by Professor Beuthin, in which he
distinguished between those jur istic acts unanimously assented to which had
run their full course and those where the real effects continued to live on,
operating in the future to the possible prejudice of others, including new
members. In my view the juristic act in the present matter has run its full
course. The lease has been concluded and the option has been exercised.
[52] It was submitted that when Mrs Vakalisa died her nominal shareholding would
have been transmitted to the executor in her estate, namely Chuma, who is not
in fav our of the sale. The disposal of the property, so it was submitted, is to be
determined at the present time in terms of the sale agreement, and not at the
time of the execution of the lease. I do not agree with this submission. I have
already dealt with the resolution and its validity. The time of the disposal of the
property in my view was the conclusion of the lease. The sale agreement is a
consequence of the exercise of the option contained in the lease. The fact that
a current director is opposed to the sale of the property does not change the
position.
[53] With regard to the interests of the heirs in Sandile’s estate, it was submitted on
behalf of the applicant that they had no interest in the shareholding of the first
respondent, nor did they ha ve a right as shareholders to participate in a
shareholders’ meeting. I agree with this submission. An heir may only enforce
a claim for his or her inheritance when the liquidation and distribution account
in an estate has been approved in terms of s 35 of the Administration of
Estates Act. See Estate Smith v Estate Follett 1942 AD 364 at 383, and
Clarkson N.O. v Gelb and Others 1981 (1) SA 288 (WLD) at 297D -E.
[54] Mrs Vakalisa’s authority was also questioned on the basis of her alleged lack of
compete nce to carry out her functions as a director. No statutory grounds for
her ineligibility were alleged. No specific qualifications were required in the
articles of association of the first respondent for a person to be appointed as a
director. She qualif ied as a nurse and a teacher and was clearly educated, but
in any event her past occupations were irrelevant. Related to this aspect is the
allegation that she did not receive legal advice when entering into the lease.
However, when the lease was notaris ed the legal effects were explained to her
by the notary, Mr Sharatt.
[55] Next I deal with the Turquand rule and s 20 (7) of the Companies Act. In
Nieuwoudt NO and Another v Vrystaat Mielies (Edms) Bpk. [2004] 1 All SA 396
(SCA) at paragraph [8] Farlam JA stated:
“A modern formulation of the rule, which was approved by Lord
Simonds in Morris v Kanssen [1946] AC 459 at 474, is taken from
Halsbury's Laws of England , 2 ed, vol 5, paragraph 698 (see now 4 ed,
reissue vol 7(1), paragraph 980) and is i n the following terms:
"Persons contracting with a company and dealing in good faith may
assume that acts within its constitution and powers have been properly
and duly performed, and are not bound to inquire whether acts of
internal management have been r egular."”
[56] …………….”the third party is not bona fide if he in fact knows that the
requirement has not been observed …………………. or if he knows facts which
as a reasonable man should put him on enquiry with regard to whether or not it
has been.” ( Henochsb erg on the Companies Act Volume 1 106.)
[57] Section 20 (7) of the Companies Act provides:
“A person dealing with a company in good faith, other than a director,
prescribed officer or shareholder of the company, is entitled to presume
that the company, in making any decision in the exercise of its powers,
has complied with all of the formal and procedural requirements in
terms of this Act, its Memorandum of Incorporation and any rules of the
company unless, in the circumstances, the person knew or reasonably
ought to have known of any failure by the company to comply with any
such requirement.”
[58] It was submitted on behalf of the first respondent that it was probable that Mr
Christodoulou knew that the first respondent was a company in name only and
that its business was conducted for the personal benefit of Mrs Vakalisa. The
following factors were highlighted in support of this submission: the
relationship between Mr Christodoulou and the Vakalisa family, especially Mrs
Vakalisa, was one o f benevolence and intimacy; Mr Christodoulou had
questioned the sale to the Sparg Group and had made known his wish to
purchase the property; Mrs Vakalisa was pliable in Mr Christodoulou’s hands
given his charity towards her; Mr Christodoulou was confronte d by Mandisile
concerning the proposed sale of the property and clause 19 of the lease was
therefore a deliberate strategy in the face of this opposition to the sale; and
clause 19 was made possible by Mr Christodoulou’s manipulation of Mrs
Vakalisa.
[59] In my view to infer knowledge on the part of Mr Christodoulou of the first
respondent’s internal requirements based on these factors, amounts to
conjecture and speculation. Much of Mandisile’s evidence on this aspect was
hearsay or speculation. Mr Chris todoulou admitted that he had had a
longstanding business and personal relationship with the Vakalisa family, and
had assisted them financially. He denied however having knowledge of the first
respondent’s internal affairs and said that he relied on Mrs V akalisa’s
representation that she was authorised to act on behalf of the first respondent.
I can find no grounds for concluding that Mr Christodoulou knew or ought
reasonably to have known that the internal requirements of the first respondent
had not be en met.
[60] It bears mentioning at this point that Mr Kincaid submitted that there is a
subtext in this matter, which colours the application. The sub -text alleged, as I
understand it, is that something untoward occurred on the part of Mr
Christodoulou and Mrs Vakalisa resulting in an intrusion on the separate legal
persona of the first respondent. Thus allegations were made of manipulation
and pliability, a strategy to achieve the sale of the property in order to bypass
opposition to the sale, Mrs Vak alisa using the first respondent as her alter ego,
and commercial exploitation of the first respondent. Such a sub -text is in my
view a matter of suspicion and speculation and is simply not supported by
evidence. Mandasile’s evidence that the first respo ndent’s income was paid
into Mrs Vakalisa’s bank account was hearsay. He did not identify the source
of his information. The mortgaging of the lease in favour of First Rand was not
a mortgage of the property. Mandisile did not substantiate his allegatio n that
finance raised by the applicant was not used for the development of the
property.
[61] The final point relied upon by the first respondent is that clause 19 offends
public policy, in that, so it was submitted, in the factual context of the matter,
clause 19 offends the fundamental principle of separate legal personality and
threatens the continued existence of the first respondent. In my view, as
indicated above, the factual context relied upon has not been established.
[62] The determination of w hether or not a contract or a contractual term offends
public policy is determined in the context of constitutional values. In Beadica
231 CC and Others v Trustees for the time being of the Oregon Trust and
Others 2020 (5) SA 247 (CC) at paragraph [83] th e following was stated
(footnotes omitted):
“The first is the principle that “[p]ublic policy demands that contracts
freely and consciously entered into must be honoured”. This Court has
emphasised that the principle of pacta sunt servanda gives effect to the
“central constitutional values of freedom and dignity”. It has further
recognised that in general public policy requires that contracting parties
honour obligations that have been freely and voluntarily undertaken.
Pacta sunt servanda is thus not a relic of our pre -constitutional
common law. It continues to play a crucial role in the judicial control of
contracts through the instrument of public policy, as it gives expression
to central constitutional values.”
[63] At paragraph [87] it was furthe r stated (footnote omitted):
“In our new constitutional era, pacta sunt servanda is not the only, nor
the most important principle informing the judicial control of contracts.
The requirements of public policy are informed by a wide range of
constitutiona l values. There is no basis for privileging pacta sunt
servanda over other constitutional rights and values. Where a number
of constitutional rights and values are implicated, a careful balancing
exercise is required to determine whether enforcement of t he
contractual terms would be contrary to public policy in the
circumstances.”
[64] Pacta sunt servanda clearly applies in the present case. With regard to other
constitutional rights and values, I do not think that clause 19 offends the
separate legal personality of the first respondent, or threatens its existence. At
the risk of repetition, the resistance to the sale of the property, and the alleged
abuse of its corporate personality are founded on suspicion and speculation. If
the sale of the prope rty is completed, the first respondent will be paid the
purchase price and will still be in existence. Option to purchase clauses and
the disposal of company assets are not unusual occurrences. If the underlying
procedures are legally executed, I can see no undermining of the first
respondent’s corporate existence.
[65] Insofar as the purchase price was linked to the aspect of public policy, it was
agreed at the time the lease was concluded and the updated calculation was
done by a chartered accountant. Other than a reference to the municipal
valuation, documentary proof of which was not annexed to the answering
affidavit, there was no evidence supporting a challenge to the original price and
the chartered accountant’s updated calculation.
[66] It fo llows that I can find no legal impediment to the enforcement of clause 19 of
the lease.
Costs
[67] The matter was complex and involved a number of issues for decision. I am of
the view that the costs of two counsel on scale C are warranted.
[68] The following order will issue:
[68.1] It is declared that the applicant has validly exercised its option
granted to it in terms of a notarial deed of lease concluded between
the applicant and the first respondent on 21 August 2015, to
purchase the immovable property described as Erf 4[...] (Portion of
Erf 2[...]), Mount Frere, Umzimvubu Municipality, district of Kwa -
Baca, Province of the Eastern Cape, in extent 945 (nine hundred
and forty -five) square metres held under certificate of registe red title
number T1338/2009.
[68.2 ] The first respondent is directed to sign, within ten (10) days of
service of this order on the first respondent, the agreement of sale
annexed to the notice of motion.
[68.3] The applicant is directed to comply with its obligations in terms of the
agreement of sale referred to in paragraph [68.2] of this order.
[68.4] In the event of the first respondent refusing and/or failing to comply
with paragraph [68.2] of this order, the sheriff of this Court is
authorised and di rected to sign the agreement of sale and all
documents necessary in order to effect transfer of the property
referred to in paragraph [68.1] of this order.
[68.5] The first respondent is to pay the costs of the application, including
the costs of two co unsel where so employed, on scale C.
_________________________
J M ROBERSON
JUDGE OF THE HIGH COURT
Appearances:
Counsel for the Applicant : Adv D H de la Harpe SC
Instructed by : Mason Incorporated,
c/o De Jager & Lordan Incorporated
Makhanda
Counsel for the First Respondent : Adv J C Kincaid
Instructed by : Chris Bodlani Attorneys
c/o Whitesides Makhanda.
Date heard : 20 February 2025
Date delivered : 29 April 2025