Curbing company phoenix activity through the application of fraudulent and reckless trading provisions

Curbing company phoenix activity through the application of fraudulent and reckless trading provisions

Authors: A Basson and K Van der Linde

ISSN: 1996-2207
Affiliations: LLD student, University of Johannesburg; Professor of Corporate Law, University of Johannesburg
Source: Tydskrif vir die Suid-Afrikaanse Reg, Issue 1, 2024, p. 31-43
https://doi.org/10.47348/TSAR/2024/i1a3

Abstract

Na analogie van die mitiese voël wat uit sy eie as herrys, word die term feniksaktiwiteit gebruik om te verwys na die verskynsel waar ’n sukkelende (ou) maatskappy vervang word met ’n tweede (nuwe) maatskappy wat wesenlik dieselfde besigheid bedryf en wat deur dieselfde persone beheer word.

Die gemeenskaplike onderskeidende kenmerke van alle onwettige of bedrieglike feniksbedrywighede is dat die ou maatskappy se bates of besigheid sonder voldoende teenwaarde aan die tweede maatskappy oorgedra word en dat daar die bedoeling is om skuldeisers te bedrieg deur die afdwinging van hul eise te ontduik. Hoewel hierdie verskynsel in ander jurisdiksies ondersoek is, en dit selfs tot regshervorming gelei het, is daar nog nie in Suid-Afrika daaraan aandag geskenk nie. Die artikel toon aan dat sulke gevalle wel in Suid-Afrika voorkom.

Die outeurs ondersoek die geskiktheid van bepalings oor die bedrieglike of roekelose bedryf van maatskappye se besigheid as maatreëls om skadelike feniksbedrywighede te beperk of die gevolge daarvan aan te spreek. In hierdie verband word ondersoek ingestel na artikel 22 van die Maatskappywet 71 van 2008 in samehang met verwante bepalings asook die bekende artikel 424 van die herroepe Maatskappywet 61 van 1973, wat as deel van hoofstuk 14 van daardie wet steeds as oorgangsmaatreël geld ten opsigte van maatskappye in likwidasie.

Die gevolgtrekking is dat, hoewel onwettige feniksbedrywighede as die bedrieglike bedryf van besigheid aangemerk kan word, hierdie bepalings nie behoorlik toegepas word nie. Daar is ’n oordrewe fokus op private afdwinging deur middel van statutêre siviele aanspreeklikheid, wat nie ingevolge die 2008-wet blyk moontlik te wees nie. Van openbare afdwinging deur middel van strafregtelike vervolging asook deur middel van die Maatskappye en Intellektuele kommissie se bevoegdhede om klagtes te ontvang en te ondersoek en in gepaste gevalle te beveel dat ’n maatskappy sy besigheidsbedrywighede moet staak, kom daar nie veel nie. Groter bewustheid van die feniksverskynsel mag dalk tot beter afdwinging van die verbod op bedrieglike of roekelose handeldryf lei. Bepalings wat spesifiek teen die tipiese eienskappe van fenikspraktyke gerig is, behoort ook oorweeg te word aangesien dit kan bydra tot die voorkoming van sodanige aktiwiteit.

The “leading case” that continues to confound: Badenhorst v Badenhorst 2006 2 SA 255 (SCA) and the need, in response to Justice Binns-Ward, for a nuanced approach to piercing the veneer of abused trusts at divorce (part 1)

The “leading case” that continues to confound: Badenhorst v Badenhorst 2006 2 SA 255 (SCA) and the need, in response to Justice Binns-Ward, for a nuanced approach to piercing the veneer of abused trusts at divorce (part 1)

Author: B Smith

ISSN: 1996-2207
Affiliations: Senior Lecturer: Research, The IIE’s Varsity College, South Africa; Extraordinary Professor of Private Law, University of the Free State
Source: Tydskrif vir die Suid-Afrikaanse Reg, Issue 1, 2024, p. 44-63
https://doi.org/10.47348/TSAR/2024/i1a4

Abstract

Hierdie bydrae poog om die siening van regter Binns-Ward in ’n referaat wat gedurende 2022 gelewer is, waarin hy ageer dat geen Suid-Afrikaanse hof tot dusver die trustsluier vir doeleindes van die vermoënsregtelike gevolge van egskeiding gelig het nie, te beoordeel. Daar word aan die hand gedoen dat alhoewel die korrekte uitleg van die toonaangewende uitspraak in Badenhorst v Badenhorst (2006 2 SA 255 (HHA)) deur ons howe steeds onseker is, drie gevolgtrekkings bereik kan word wat lynreg indruis teenoor dié van regter Binns-Ward.

Die eerste is dat die Badenhorst-uitspraak – wat oor ’n herverdeling-van-bates-bevel ingevolge artikel 7 van die Wet op Egskeiding 70 van 1979 gehandel het – wel ’n lig van die trustsluier behels het, na aanleiding van die uitoefening van ’n gemeenregtelike bevoegdheid wat onafhanklik staan van enige diskresie wat moontlik ingevolge die Wet op Egskeiding of die Wet op Huweliksgoedere 88 van 1984 uitgeoefen mag word. In die Badenhorst-saak is dit bewerkstellig deur die appellant se voldoening aan die sogenaamde “beheer-toets”, ingevolge waarvan aangetoon is dat die respondent se misbruik van die trustvorm behels het dat sy persoonlike boedel onderwaardeer is. Voldoening aan hierdie toets was egter nie genoeg om die appellant toe te laat om in die respondent se (herwaardeerde) boedel te deel nie; dit kon slegs gebeur indien die toepassing van subartikels 7(4) en (5) ’n verband (nexus) geskep het tussen die uitoefening van die gemeenregtelike bevoegdheid en bateverdeling ingevolge die tersaaklike huweliksgoederestelsel (algehele skeiding van goedere).

Tweedens is die remedie wat aan die appellant voorsien is inderdaad ’n remedie vir die misbruik van die trustvorm, in die sin dat daar gepoog is om ’n verpligting wat aan die appellant by egskeiding verskuldig is (te wete die moontlikheid van ’n herverdelingsbevel ingevolge subartikel 7(3) van die Wet op Egskeiding) te omseil. Hierdie remedie behels ’n “beperkte beskouingsbevel” ingevolge waarvan ’n gade se persoonlike aanspreeklikheid bepaal word deur die trustbates in ag te neem sonder dat beslag gelê mag word op daardie bates. Hierdie persoonlike aanspreeklikheid het behels dat die waarde van die trustbates toegevoeg is tot die respondent se boedel vir doeleindes van die herverdelingsbevel soos deur die appellant aangevra. Hierdie gevolgtrekking strook met die beginsels wat ek aanvoer toegepas behoort te word gegewe die genuanseerde konteks van trustmisbruik in die egskeidingsverband en die eiesoortige aard van die regsverpligting wat gepoog is omseil te word.

Derdens word, na aanleiding hiervan, die gevolgtrekking bereik dat die “beheer-toets” in die Badenhorst-saak inderdaad – soos tereg bevind is in PAF v SCF (2022 6 SA 162 (HHA)) – toepassing behoort te geniet waar, onder andere, die aanwasbedeling ter sprake is. Voorts word aan die hand gedoen dat regter Binns-Ward se onderskrywing van die uitspraak in MJK v IIK (2023 2 SA 158 (HHA)) ter onderskraging van sy standpunte onoortuigend is, weens die inherente tekortkominge van daardie hof se ratio decidendi.

Die formeelregtelike grondslag van die ex contractu-eis vir skadevergoeding weens kontrakbreuk

Die formeelregtelike grondslag van die ex contractu-eis vir skadevergoeding weens kontrakbreuk

Author: S Cornelius

ISSN: 1996-2207
Affiliations: Professor en Hoof van die Departement Privaatreg, Universiteit van Pretoria
Source: Tydskrif vir die Suid-Afrikaanse Reg, Issue 1, 2024, p. 64-74
https://doi.org/10.47348/TSAR/2024/i1a5

Abstract

Parties generally enter into contractual relations with the sincere intention to fulfil all the obligations created in terms of their contract. However, for various reasons, parties sometimes do not comply with the terms of their contract. Where a party fails or refuses to perform their obligations as specified in their contract, that party commits breach of contract and the normal consequences for breach then ensue. One of these consequences is that the injured party may institute a claim for damages.

The nature of this remedy has been called into question. Is a claim for damages due to breach of contract derived from the contractual relationship between the parties, or is it no more than a delictual claim presented under the guise of contract? The fundamental values underlying the law of contract are consensus and reliance, as well as freedom of contract, sanctity of contract (pacta sunt servanda), good faith and privity of contract.

Freedom of contract and sanctity of contract demand that contracts that are freely entered into must be honoured and enforced. From this arises the principle that breach of contract occurs even if the failure or refusal to abide by the contract cannot be attributed to fault in the sense of a wilful disregard of the contract or a negligent failure to abide by the contract. This is in stark contrast with delict, where fault is generally required for liability. Furthermore, reliance and good faith also demand that the parties should honour their obligations in terms of the contract. This relationship based on reliance and good faith is broken when breach occurs, with the result that there is a need to provide redress to the injured party that can be derived from the contractual relationship. Lastly, privity of contract generally limits the effects of the contract, as well as the resultant rights and duties in terms of the contract, to the parties who contracted with each other. There is no such closed notion of privity in delict.

The article aims to explore the law of contract from a historical perspective and from a comparative analysis of various jurisdictions today to determine the nature of the claim for damages due to breach of contract. It concludes that there are fundamental differences between a claim for damages due to breach and a claim for damages due to the wrongful and culpable conduct of a third party. As a result, it is clear that the claim for damages due to breach of contract is a claim ex contractu that must be distinguished from delictual claims.

Re-assessing the African Principles on the Law Applicable to International Commercial Contracts through the prism of African traditional values

Re-assessing the African Principles on the Law Applicable to International Commercial Contracts through the prism of African traditional values

Author: TE Coleman

ISSN: 1996-2207
Affiliations: Senior Postdoctoral Research Fellow, Centre for International and Comparative Labour and Social Security Law, University of Johannesburg
Source: Tydskrif vir die Suid-Afrikaanse Reg, Issue 1, 2024, p. 75-95
https://doi.org/10.47348/TSAR/2024/i1a6

Abstract

Die ontwikkeling van die African Principles on the Law Applicable to International Commercial Contracts is geïnspireer deur die noodsaak van ’n betroubare en stabiele transnasionale regsraamwerk in ooreenstemming met die verbintenis van die Afrika-Unie tot die bevordering van ekonomiese groei by wyse van die daarstelling van ’n vryehandelsone in Afrika. Die African Principles is ontwerp as pan-Afrikaanse instrument en dien as ’n modelwet vir nasionale en, in die toekoms, regionale en supranasionale wetgewing in Afrika. Dit poog om reëls oor die internasionale handelsreg op die Afrika-kontinent te harmoniseer. Die African Principles is beïnvloed deur internasionale instrumente soos die Hague Principles on Choice of Law in International Commercial Contracts en die UNIDROIT Principles of International Commercial Contracts, asook ander internasionale instrumente.

Met die pan-Afrika aspirasies van die African Principles, verwag ’n mens dat dit die gedeelde waardes en etiek van Afrika-samelewings weerspieël en absorbeer. Hierdie verwagting is geanker in die toenemende hoeveelheid uitsprake van sommige howe in Afrika om tradisionele Afrika-waardes en -etiek te demarginaliseer en in die Afrika-handels- en kontraktereg op te neem. Ongelukkig gee die huidige konsep van die African Principles nie uitvoering aan die groeiende oproep om tradisionele Afrika-waardes en -etiek op eiesoortige en unieke wyse te inkorporeer nie, ten spyte van die pan-Afrika omvang en toepassing daarvan. Kenmerkend van die African Principles is die verbintenis tot Westerse beginsels van individualisme en party-outonomie as ’n middel om oorgrens-kommersiële aktiwiteite op die Afrika-vasteland te bevorder.

Met hierdie artikel poog die outeur om die African Principles deur die lens van tradisionele Afrika-waardes en -filosofie te heroorweeg. Daar word besin oor die debatte en implikasies van die invoeging van tradisionele Afrika-waardes in die handels- en kontraktereg. Dit stel voor dat die bepalings in die African Principles gemodelleer word in ooreenstemming met daardie waardes.

Aantekeninge: Some rights are more equal than others – the constitution will perish, unless all of it is taken seriously

Aantekeninge: Some rights are more equal than others – the constitution will perish, unless all of it is taken seriously

Author: J Van der Westhuizen

ISSN: 1996-2207
Affiliations: Universiteit van Johannesburg
Source: Tydskrif vir die Suid-Afrikaanse Reg, Issue 1, 2024, p. 96-104
https://doi.org/10.47348/TSAR/2024/i1a7

Abstract

Weens Suid-Afrika se geskiedenis van kolonialisme en apartheid, asook ernstige ongelykheid, was dit noodsaaklik om sosio-ekonomiese regte naas burgerlike en politieke regte in die menseregtehandves van die grondwet te beskerm. Alle regte is egter nie ewe afdwingbaar nie. Indien sosio-ekonomiese regte leë beloftes blyk te wees, mag wantroue ontstaan in die verwesenliking van alle regte in die grondwet.

Artikel 184(3) van die grondwet skep ’n meganisme vir verslagdoening oor stappe ter verwesenliking van die regte rakende behuising, voedsel, water, mediese sorg, maatskaplike bystand, onderwys en omgewingsbewaring; asook die monitering van menseregte deur die Suid-Afrikaanse Menseregtekommissie. Die stelsel het egter grootliks in duie gestort. Dit mag neerkom op die verontagsaming van ’n direk opgelegde grondwetlike verpligting. Indien ander grondwetlike verpligtinge – byvoorbeeld dat die president ’n verkiesing moet afkondig – dieselfde pad loop, is ons grondwetlike demokrasie in gevaar.

Litigasie, byvoorbeeld ’n aansoek om ’n hofbevel dat een of meer respondente verklaar word om ’n grondwetlike plig te verontagsaam, mag nodig wees om die lot van armes te verbeter en die oorlewing van die grondwet te verseker.

Aantekeninge: Afgeleide wyse van eiendomsverkryging op ’n onroerende saak gehou in mede-eiendom vereis steeds ’n saaklike ooreenkoms met álle mede-eienaars

Aantekeninge: Afgeleide wyse van eiendomsverkryging op ’n onroerende saak gehou in mede-eiendom vereis steeds ’n saaklike ooreenkoms met álle mede-eienaars

Author: JC Sonnekus

ISSN: 1996-2207
Affiliations: Universiteit van Johannesburg
Source: Tydskrif vir die Suid-Afrikaanse Reg, Issue 1, 2024, p. 105-122
https://doi.org/10.47348/TSAR/2024/i1a8

Abstract

In EMD v Fourie (2493/2019) 2023 ZAECQBHC 46 (17 August 2023) the erstwhile couple Daniels were married in 1987. During the subsistence of their marriage, they jointly acquired an immovable property as their matrimonial home, and this was duly registered and held in joint ownership. For the acquisition of the property a loan secured with a mortgage bond by the bank was registered against the property’s title deed. Even after their divorce no amendment regarding the registration of the property held in joint ownership took place. The erstwhile wife with the couple’s children remained in occupation of the house after the husband moved out with his new wife. In time the erstwhile wife also remarried and stayed in the house with her new husband, Jacobs.

When the joint debtors encountered cash-flow problems and were unable to meet the bond payments, the house was rented to tenants. The bank eventually foreclosed on the mortgage bond and acquired an execution order from the court. Shortly before the date for the auction a knowledgeable employee of the bank materialised as the proverbial good Samaritan and suggested that with the help of “befriended attorneys” and an estate agent a “special arrangement” may be reached to safeguard the asset – akin to “pawn your car and drive it”. Eventually the wife and her new husband, masquerading as the erstwhile husband and co-owner, signed documents that in reality encompassed an agreement to sell the property for R70 000. After the transfer was duly registered the new registered owner served eviction orders on all tenants and occupiers.

The court upheld the application of the original registered co-owners and ordered a rectification of the deeds register to once more reflect the true legal position of their joint ownership. Because the erstwhile husband was not even aware of the intended scheme of his ex-wife and her new husband, the alleged real agreement did not exist. A joint owner can dispose of his/her undivided share of the interest held in co-ownership but has no entitlement to dispose of the complete undivided real right without the agreement of the other joint owners involved. Mr Daniels never had the animus transferendi dominii and the masquerading signatory Jacobs was not entitled to represent him as his agent nor to forge his signature. The purchaser never considered buying merely an undivided co-ownership share in the property and consequently there was neither an obligatory nor a real agreement.

The successful application for the rei vindicatio is founded, however, not in the nullity of the obligatory agreement nor on errors regarding the formal requirements of Act 68 of 1981 but in the fact that legally no change in the ownership occurred in the absence of a valid real agreement and consequently the true owners could rely on the rei vindicatio.

The primary defence of estoppel was correctly disposed of by Eksteen J because Mr Daniels made no representations at all to the purchaser, the registrar or the conveyancer involved and the first requirement for estoppel is always that the estoppel asserter acted on the representation made by the applicant as estoppel denier and not on representations by an imposter. The court correctly held: “He did not sign the deed of sale, nor did he sign the power of attorney to pass transfer and he was, at all times, entirely unaware of the process. As I have said Mr Jacobs forged his signature” (par 11).

It is submitted that although the outcome of the judgment is correct in so far as the “domicile” of the real right of ownership to the immovable property is concerned, it leaves some unease that the erstwhile debt secured by the mortgage bond was wiped out by the payment of that debt to the bank by the purchaser before the alleged registration of the transfer of the property in the name of the purchaser could take place. With the rectification of the unjustified registration, the property is once more registered in the names of the two original joint owners, but now it is no longer burdened by the mortgage debt. This translates to a significant unjustified enrichment of the joint owners at the cost of the duped purchaser, who was bona fide uninformed about the fraudulent chicanery of the attorneys, estate agent and Mrs Daniels and Mr Jacobs. In addition to her loss, she was burdened with the cost order.

It is also troublesome that the judgment does not mention whether the court referred the conduct of the attorneys and the estate agent involved in the fraudulent activity to the applicable governing bodies: “Ms Daniels alleged that Mr Postumous [an attorney], Mr Bekker, an estate agent, and Ms Cradock, an attorney in the employ of the fifth respondent, knew of his [ie Mr Jacobs’] true identity and that they had advised him to sign, as if he were Mr Daniels, because of the urgency of the matter” (par 6 and 9).

It ought to be considered whether the perpetrators of such fraudulent conduct should not be barred as unworthy of the professions as attorneys or as a registered estate agent.