Northview Shopping Centre (Pty) Ltd (the appellant) sought specific performance of a contract for the purchase of immovable property from Revelas Properties Johannesburg CC (the first respondent), a close corporation. The contract was signed on behalf of Revelas by Nick Christelis (the second respondent), who was the husband of the sole member of Revelas but was not himself a member of the close corporation. Revelas contended that Christelis had no written authority to sign the contract as required by section 2(1) of the Alienation of Land Act 68 of 1981, and therefore the sale was invalid for want of formalities. Northview argued that written authority is not required when a close corporation is the principal. Revelas excepted to the claim on two bases: first, that the claim was vague and embarrassing because it did not expressly aver that Christelis was authorized in writing (pleading exception); and second, that the claim lacked averments necessary to sustain an action (substantive exception). Brett AJ in the South Gauteng High Court upheld both exceptions.
The appeal was dismissed with costs. The substantive exception was correctly upheld by the high court - the contract was invalid in the absence of written authority given to Christelis by the member of Revelas.
Where an agent of a close corporation who is not a member concludes on its behalf a contract for the sale of land, authorization must be in writing in order to comply with section 2(1) of the Alienation of Land Act 68 of 1981. The Potchefstroom Dairies principle applies only to functionaries whose authority derives from law (statute, articles of association, or common law). It does not apply to agents whose authority arises from express authorization by the principal. Members of close corporations, like partners in partnerships, derive their authority from law and therefore need no written authority. However, when a member authorizes an agent (a third person who is not a member) to enter into a contract for the sale of land on behalf of the close corporation, that authorization must be in writing. The absence of an equivalent to section 69 of the Companies Act in the Close Corporations Act is deliberate, and close corporations are governed by partnership principles rather than company law principles.
The court expressed doubt about whether section 69 of the Companies Act was ever intended to apply to persons who are not functionaries of a company and who do not have authority by virtue of their position within the company. However, the court made no finding on this issue as it was not debated before the court and was assumed by the parties. The court also noted that it would be extraordinary if a sole member of a close corporation could orally (or by conduct) authorize an agent to sign a contract for the sale of land, when a natural person acting as principal must give written authority. The court observed that the finding on the pleading exception (that the claim was vague and embarrassing) was incorrect, but in any event would not be appealable as it was not final in effect.
This case clarified the requirements for written authority under section 2(1) of the Alienation of Land Act when agents act on behalf of close corporations. It established that while members of close corporations (as functionaries) do not require written authority to bind the corporation to contracts for the sale of land, agents who are not members must have written authority. The judgment distinguished close corporations from companies, holding that close corporations are governed by partnership principles rather than company law principles. The case also clarified the distinction between 'primary attribution' of authority (by statute or law, as with functionaries) and 'secondary attribution' (by expression of will, as with outside agents). This is an important decision for conveyancing practice and close corporation law in South Africa.
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