Consumer Information

Author : Maryna Botha – STBB
28 April 2016

SALE VOID WITHOUT SIGNATURE OF ALL THE LIQUIDATORS
SHANMUGAM V PETER N.O AND OTHERS (11638/2015) [2016] ZAKZDHC 16 (20 APRIL 2016)

Where liquidators of a close corporation sell immovable property of the entity, it is necessary that each one signs the agreement or gives permission to another to sign on his behalf, failing which the agreement is rendered void. This is because a liquidator is in the same position as a duly authorised functionary and member of the close corporation and his or her actions are those of the close corporation.

SUMMARY OF JUDGMENT

FACTS
Shanmugam purchased a property from the liquidators of CKT Express CC on 5 June 2012. The agreement was only signed by two of the three liquidators.

The transaction did not proceed as Shanmugam breached the agreement by failing to make certain required payments and it was subsequently cancelled. Most of the money which he had paid towards the purchase price was refunded to him (although he said he accepted it under protest).

After subsequent failed sales in execution, the property was sold by private treaty to a third party on 3 November 2015.

At the same time (3 November 2015), Shanmugam instituted an action in which he sought an order for the transfer of the property to him, against a tender to perform all his obligations as purchaser in terms of the agreement concluded in June 2012.

Then on 23 November 2015, Shanmugam launched an application to interdict the transfer of the property pending the final determination of the action he had instituted. This was successful and the present matter deals with the return day of the interim interdict. Shanmugam argued that the sale agreement was still valid and that the liquidators were precluded from selling the property to a third party.

The liquidators contended, on the other hand, that the agreement relied on by Shanmugam was invalid ab initio because it was not signed by all the liquidators and thus in contravention of the Alienation of Land Act; that it was in any event cancelled by reason of his breach; and that his claim for transfer of the property had become prescribed. 

HELD
Was the sale void?

• In terms of section 2(1) of the Alienation of Land Act, no alienation of land shall be of any force or effect unless it is contained in a deed of alienation signed by the parties thereto or by their agents acting on their written authority.

• Corporate entities, being unable to act other than through natural persons, cannot give written authority to their representatives. A member of a close corporation, authorised as such to sign, does not require written authority to sign such a contract. Where a member however authorises a third person to enter into such a contract, the authorisation must be in writing.

• The agreement in the present matter was not signed by a member of the close corporation, but by two of the three liquidators. The requirement that written authority had to be in place, as per section 2(1) of the Alienation of Land Act, thus did not find application as the liquidators were not agents as contemplated in that section. Rather, their actions were those of the close corporation because, when a liquidator performs the functions of an entity, his acts are the acts of the entity.

• It followed that when there is only one liquidator, he does not need written authority to sign a contract for the sale of land as he is in the same position as a duly authorised functionary of the company. If one of several liquidators signs such a contract, the only question is whether he was authorised to do so, as in the case of a functionary of a company.

• Section 282 of the Companies Act of 1973 required liquidators to act jointly in performing their functions.

• Therefore, as the third liquidator did not sign the agreement nor authorize the other two to do so, they could not bind the close corporation.

CONCLUSION
The agreement was therefore void.

Prescription
• The letter of cancellation was sent to Shanmugam on 16 August 2012 and any claim he may have had for transfer arose not later than the date on which he received that letter.

 The Judgment can be viewed here: