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IN THE NORTH WEST HIGH COURT, MAFIKENG

CASE NO:  UM 26/2018

NOT REPORTABLE

NOT OF INTEREST TO OTHER JUDGES

CIRCULATE TO OTHER MAGISTRATES: NO

CIRCULATE TO REGIONAL MAGISTRATES: NO

In the matter between:

DAWID PHILIPUS MARAIS                                                                Applicant

and

BOTBRO (PTY) LTD                                                                      Respondent

 

DATE OF HEARING: 28 FEBRUARY 2018

DATE OF REASONS FOR JUDGMENT: 07 MARCH 2018

COUNSEL FOR THE PLAINTIFF: ADV. KLOPPER

COUNSEL FOR THE DEFENDANT: ADV. TROMP

JUDGMENT

HENDRICKS J

Introduction

[1] On the 28^th February 2018, after listening to submissions by counsel and upon perusal of the affidavits and documents as well as the heads of arguments filed, I granted an order (in terms of the draft order) with the following terms:

“1. This application be entertained as one of urgency and condonation for the non-compliance with rule 6(12) of the Uniform Rules of Court with regard to service and time periods is hereby granted;

2. The Respondent be hereby ordered to sign the deed of transfer documents for the transfer of the immovable property known as Portion 2 (a portion of portion 1) of the farm Vlakplaats 79, measuring 78, 8681 (seventy eight comma eight thousand six hundred and eighty one) hectares in accordance with the provisions of the purchase agreement entered into by and between the parties on 9 December 2016, within ten days from date of this order;

3. Should the Respondent fail to comply with the order as set out in paragraph 2 supra, the Sheriff of the High Court for the district of Mahikeng is hereby authorised to sign the deed of transfer documents on behalf of the Respondents and to take whatever steps may be necessary so as to give effect to such transfer of the subject property in favour of the Applicant.

4. The Applicant be ordered to render his assistance to the Respondent for the transfer of the water rights on the property referred to in paragraph 2 above in favour of the Respondent in accordance with the provisions of paragraph 16 of the Sale Agreement entered into by and between the parties.

5. The Respondent be ordered to proceed with the application for the transfer of the water rights in terms of the provisions of the National Water Act, No 36 of 1998 within 90 (ninety) days of date of this order.

6. Pending transfer of the water rights the Applicant will afford the Respondent the right of use of such water rights for Respondent's irrigation farming operations on the Respondent's neighbouring farm known as Remaining Portion of Portion 6 of the Farm Vlakpan 75, Registration Division J.O., North West Province.

7. Cost of the application to be paid by the Respondent.

8. Reasons for this order will be handed down on 08^th March 2018.”

[2] Here follows the reasons for the order granted. On the 09^th of December 2016 the applicant and Mr. Schalk Botha, a director of the respondent, entered into a sale agreement. In terms of this agreement, the respondent sold to the applicant, Portion 2 of the farm Vlakplaats for the amount of R560 000.00, subject to certain conditions. On the same date, the applicant duly performed in terms of the agreement and paid the purchase price in two amounts, to wit R160 000.00, (which was deposited into the bank account of the respondent with reference “Schalk Botha”) and R400 000.00, (which was deposited into the trust account of the respondent’s attorneys with reference “ABSA Bank prokureur”, the attorney that would transfer the property into the name of the applicant).

[3] Mr. Schalk Botha was sequestrated by this Court on 27^th July 2017. He also resigned as a director of the respondent on the 16^th November 2017. The remaining director, Mr. Leon Potgieter, was approached to sign the documents to effect transfer of the property into the name of the applicant. Mr. Leon Potgieter refused to do so. An application was launched, on an urgent basis, for the following relief as set out in the Notice of Motion.

“1. That the application be entertained as one of urgency condonation and that the non-compliance with Rule 6(12) of Uniform Rules of Court with regard to service and time periods be condoned;

2. That the Respondent be compelled to sign the deed of transfer documents in relation to the immovable property known as Portion 2 (a portion of Portion 1) of the Farm Vlakplaats 79 measuring 78,8681 (seventy eight, eight, six, eight, one) hectares in accordance with the provisions of the purchase agreement entered into by and between the Applicant and the Respondent on 9 December 2016, within ten days from date of this order;

3. That in the event of the Respondent failing to comply with the order as set out in paragraph 2 supra, the sheriff of the High Court for the district of Mahikeng hereby be authorised to sign the deed of transfer documents and to take whatever steps may be necessary so as to give effect to such transfer of the subject property in favour of the Applicant;

4. Costs of the application in favour of the Applicant;

5. Further and/or alternative relief.”

[4] Mr. Leon Potgieter contended that the sale agreement is invalid because Mr. Schalk Botha was not authorized to enter into the agreement for and on behalf of the respondent, especially not to alienate the farm. Although it was contended that the matter is not urgent, no point in limine was raised about it that needed to be decided separately form the merits of the application.

[5] It is common cause that at all relevant times Mr. Schalk Botha, in his capacity as director of the respondent, acted for and on behalf of the respondent. In aforementioned capacity, Mr. Schalk Botha entered into the agreement of sale with the applicant on 9 December 2016 for the sale of the property. Mr. Hennie van Biljon, an attorney appointed as the conveyancer by the respondent failed to transfer the property as he was instructed to do. Subsequently, and on applicant's instance, the matter was transferred to applicant's attorney of record, Mr. Gerhard Maree of Maree & Maree Attorneys, Mahikeng to attend to the transfer of the property.

[6] In terms of the written sale agreement, the applicant occupied the farm from 9 December 2016, being the date of conclusion of the agreement between the parties. Since February 2017, Mr. Leon Potgieter had full knowledge of the applicant's occupation of the said farm. Despite having knowledge about the application, neither the respondent nor Mr. Leon Potgieter, in his capacity as director of the respondent, made any attempt to evict the applicant from the farm.

[7] It is common cause that even prior to conclusion of the sale agreement between the parties, Mr. Schalk Botha, in his capacity as duly authorised director of the respondent, concluded various agreements, for and on behalf of the respondent. Mr. Leon Potgieter states in his opposing affidavit that he was not aware that Mr. Schalk Botha entered into this agreement with the applicant to sell Portion 2 of the farm. He was also unaware that the purchase price was paid by the applicant. The first time that he came to know about this was when he was approached and requested to sign the documents in order to effect transfer of the property into the name of the applicant. This indeed proves that Mr. Schalk Botha was de facto the managing director of the respondent. He was handling the day-to-day affairs of the respondent.

[8] Section 19 of the Companies Act, Act 71 of 2008 (‘the Companies Act’) states:

“19 Legal status of companies

(1)  From the date and time that the incorporation of a company is registered, as stated in its registration certificate, the company-

(a)  is a juristic person, which exists continuously until its name is removed from the companies register in accordance with this Act;

(b)  has all of the legal powers and capacity of an individual, except to the extent that-

(i) a juristic person is incapable of exercising any such power, or having any such capacity; or

(ii) the company's Memorandum of Incorporation provides otherwise;

(c) is constituted in accordance with-

(i) the unalterable provisions of this Act;

(ii) the alterable provisions of this Act, subject to any negation, restriction, limitation, qualification, extension or other alteration that is contemplated in an alterable provision, and has been noted in the company's Memorandum of Incorporation; and

(iii) any further provisions of the company's Memorandum of Incorporation.

(2) A person is not, solely by reason of being an incorporator, shareholder or director of a company, liable for any liabilities or obligations of the company, except to the extent that this Act or the company's Memorandum of Incorporation provides otherwise.

(3) If a company is a personal liability company the directors and past directors are jointly and severally liable, together with the company, for any debts and liabilities of the company as are or were contracted during their respective periods of office.

(4) Subject to subsection (5), a person must not be regarded as having received notice or knowledge of the contents of any document relating to a company merely because the document-

(a) has been filed; or

(b) is accessible for inspection at an office of the company.

(5) A person must be regarded as having notice and knowledge of-

(a) any provision of a company's Memorandum of Incorporation contemplated in section 15 (2) (b) or (c) if the company's name includes the element 'RF' as contemplated in section 11 (3) (b), and the company's Notice of Incorporation or a subsequent Notice of Amendment has drawn attention to the relevant provision, as contemplated in section 13 (3); and

(b) the effect of subsection (3) on a personal liability company.

[Sub-s. (5) substituted by s. 12 of Act 3 of 2011 (wef 1 May 2011).]

(6) If a company has amended its Memorandum of Incorporation, the Memorandum of Incorporation as previously adopted by the company has no force or effect with respect to any right, cause of action or matter occurring or arising after the date on which the amendment took effect.

(7) After a company has changed its name, any legal proceedings that might have been commenced or continued by or against the company under its former name may be commenced or continued by or against it under its new name.

[9] Section 20 (7) and (8) of the Companies Act states:

“Section 20 (7):   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.

Section 20(8): Subsection (7) must be construed concurrently with, and not in substitution for, any relevant common law principle relating to the presumed validity of the actions of a company in the exercise of its powers.”

[10] A alluded to, Mr. Leon Potgieter contended that Mr. Schalk Botha did not have the necessary authority to bind the respondent in the agreement of the sale of the farm to the applicant. Adv. Tromp, acting on behalf of the respondent, submitted that there was not even ostensible authority on the part of Mr. Schalk Botha to sell or alienate the assets of the respondent.

[11] In One Stop Financial Services (Pty) Ltd v Neffensaan Ontwikkelings (Pty) Ltd & Another 2015 (4) SA 623 (WCC) the following is stated:

“[51] Section 20(7) has been regarded by some as a codification of the Turquand rule (Davis et al Companies and Other Business Structures in South Africa 2006 at p 42). Other writers have pointed out that the abolition in general of the principle of constructive notice has made the retention of the Turquand rule largely unnecessary, because the rule was only ever an amelioration of the ramifications of constructive notice (Katz Governance under the Companies Act 2010 Acta Juridica 248 at 252-253; Delport Companies Act 71 of 2008 and the ‘Turquand’ Rule 2011 THRHR 135-138). Katz suggests that the Turquand rule has been retained in s 20(7) to deal with constructive notice in relation to RF companies. Delport points out that the retention of the Turquand rule may also come to the aid of a third party who has actual notice of a non-RF company’s articles. Delport also mentions possible differences in the scope of the Turquand rule and its supposed codification in s 20(7).

[52] If s 20(7) is a codification of Turquand, s 20(8) might be thought to be a puzzling provision. However, I do not think that its existence justifies a strained interpretation of s 20(7). It is more likely, in my view, that the lawmaker was concerned that its attempts to formulate the Turquand rule in s 20(7) might not cover the whole ground. Section 20(8) was thus added to foreclose an argument that s 20(7) had inadvertently repealed any part of the Turquand rule.

[53] One significant change brought about by the abolition in general of constructive notice is that a company can now be bound on the basis of ostensible authority even where the articles place authority on the matter in question completely beyond the potential scope of authority of the purported representative (my case 1 above). Because a third party would not be fixed with constructive notice of this restriction (unless the company were an RF company), the third party could potentially hold the company liable if the purported representative was held out by the company as having the authority in question. However, this is a change flowing from the abolition of constructive notice and has nothing to do with Turquand or s 20(7).

[54] Whatever differences there might be between Turquand and s 20(7), I do not think the new provision has brought about any change in the law governing the circumstances in which a company can be held bound on the basis of ostensible authority. In the present case it is difficult to see what scope there could be for Turquand or s 20(7), given the absence of evidence regarding the content of Neffensaan’s articles and given in any event that OSF would not be fixed with constructive knowledge of the articles and that there is no evidence that OSF had actual knowledge thereof.

[55] However, if one assumes that the articles contained at the relevant time a power of delegation in terms of which the board could have delegated to Moller and/or Coetzee the authority to conclude loan agreements of the kind in question, and if one assumes that OSF had knowledge of this power, s 20(7) would not in itself have entitled OSF to assume that the board had in fact delegated the authority in question to Moller and/or Coetzee any more than the Turquand rule would have entitled OSF so to assume. There is no indication that the lawmaker, in enacting s 20(7), intended to introduce so radical a change to the legal position relating to ostensible authority. The expression ‘formal and procedural requirements’ in s 20(7) must, I think, be construed consistently with the conventional scope of Turquand. Where the board’s authority is qualified by a condition of prior shareholder approval, the said condition could be regarded as a formal or procedural requirement. Where a person is, or is held out to be, the company’s managing director, the precise terms of and restrictions on the authority delegated to the managing director might be regarded as a formal or procedural matter. In relation to an ordinary director, however, the conferral of authority to bind the company is not merely a formal or procedural matter.

[56] Another way of looking at this question is by giving due weight to the requirement in s 20(7) that the third party should have been dealing with the ‘company’. The section does not state that the third party may make any assumptions when dealing with a purported representative per se. This reinforces the view that in order for s 20(7) to apply the third party must establish that he was dealing with someone who had actual or ostensible authority to bind the company, because only in those circumstances can he say that he was dealing with the ‘company’. This was the first of the two fundamental questions Claassen J posed in Wolpert: ‘When does one deal with or contract with a company?’ (at 265A). The answer he gave (at 265D-267A) was that one deals with the company when the latter is represented by a person having actual or ostensible authority. Once the third party has established the actual or ostensible authority of the representative, he cannot be non-suited because of non-compliance on the part of the company with some formal or procedural requirement which would have been necessary to make the ostensible agent’s authority complete.

[57] It follows that Neffensaan would only be bound by the loan agreements if Moller and/or Coetzee, who lacked actual authority, had ostensible authority to bind the company to the agreements. As I have said, there is no evidence that Moller and/or Coetzee were held out as persons authorized to manage the company’s affairs.”

[12] I find the aforementioned dictum quite apposite in this case. It is quite apparent, as alluded to earlier on in this judgment, that Mr. Schalk Botha was managing the affairs of the respondent and could be regarded as the managing director of the respondent at the time when the agreement was entered into with the applicant. That explains why he entered into the said agreement in which it is categorically stated that he duly represent (“behoorlik verteenwoordig”) the respondent meaning that he was duly authorized to enter into the said agreement for and on behalf of the respondent. In my view, Mr. Schalk Botha at least had ostensible authority to conclude the agreement. No evidence to disprove this was presented by the respondent.

[13] It is common cause that Portion 2 of the farm Vlakplaats is already a sub-divided portion from Portion 1 of the farm. Vlakplaats Portion 2 is used for cattle farming whilst Vlakplaats Portion 1 is used for crop farming. Water rights was issued for the farm Vlakplaats Portion 2. Vlakplaats Portion 1 get water for irrigation of the crops from Vlakplaats Portion 2. The following special condition of sale is contained in Clause 16 of the agreement:-

“16. SPESALE VOORWAARDE

Die partye bevestig dat die waterreg wat ten opsigte van die eiendom geregistreer is spesifiek en by ooreenkoms uitgesluit word van heirdie koop en dat die VERKOPER geregtig sal wees om aansoek te doen by die betrokke owerhede om die waterreg oor te dra na die aangrensende eiendom van die VERKOPER.

Die KOPER onderneem om na registrasie van die eiendom in sy naam die VERKOPER by te staan en enige en alle dokumente te, onderteken wat nodig mag wees om voorgemelde oordrag van die waterreg te ken bewerkstellig.

Die KOPER onderneem om geen besproeiing op die eiendom te doen nie maar slegs water te gebruik vir veesuiping tot sodanige tystip waarop die waterreg wetlik na die aangrensende eiendom soos vooremeld oorgedra is.”

In my view, the applicant must comply with the aforementioned terms of the agreement. To ensure compliance, it is incorporated in the order of this Court quoted in paragraph 1 of this judgment.

[14] It is for the aforementioned reasons, inter alia, that I granted the order as contained in paragraph 1, supra.

 

 

R D HENDRICKS

JUDGE OF THE HIGH COURT,

NORTH WEST DIVISION, MAHIKENG

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