Naidoo and Another v The Dube Tradeport Corporation and Others

The first appellant, Sagadava Naidoo, and the second appellant, Odora Trading CC, sought to set aside the sale of certain immovable properties (the Penare Farm Properties) by Odora to The Dube Tradeport Corporation. Although the second respondent, Sivaraj Naidoo, was the sole registered member of Odora, Sagadava alleged that he was the true beneficial owner of the member’s interest, with Sivaraj holding it as his nominee pursuant to oral agreements concluded in 1998 and/or 2001. While litigation between the brothers concerning ownership and control of Odora was pending, Sivaraj sold Odora’s only assets to Dube Tradeport. Sagadava alleged that this sale was unlawful and fraudulent, that Odora was prevented from acting due to Sivaraj’s control, and that Dube Tradeport knew or ought to have known of the dispute and Sivaraj’s lack of authority.

The appeal was upheld with costs. The High Court’s order was set aside and substituted with an order dismissing the exception with costs.

The case clarifies that the common law derivative action remains available to close corporations that continue to exist under the Close Corporations Act and have not converted into companies. It confirms that beneficial or unregistered holders of members’ interests may, in appropriate circumstances, have locus standi to institute derivative proceedings. The judgment also restates the correct approach to exception proceedings and limits the protection afforded to third parties under section 54 of the Close Corporations Act where knowledge of a dispute or lack of authority is alleged.