Constantaras v BCE Foodservice Equipment (Pty) Ltd

The respondent sued the appellant, Michael Constantaras, for payment of two dishonoured cheques totalling R65 229,25. The cheques were issued in favour of the respondent and signed by the appellant, ostensibly on behalf of Cater-Mart, but the cheques reflected an incorrect corporate description, namely a (Pty) Ltd with an outdated registration number, and did not indicate that the appellant signed in a representative capacity. The close corporation failed to pay the cheques. The respondent relied on section 23(2) of the Close Corporations Act 69 of 1984 to hold the appellant personally liable. The appellant pleaded that he signed as an authorised representative of the close corporation and, alternatively, sought rectification of the cheques to reflect the correct corporate details and his representative capacity. The respondent excepted to the plea, contending that rectification was not a valid defence to statutory liability under section 23(2).

The appeal against the substantive finding failed: the exception to the plea of rectification was correctly upheld and personal liability under section 23(2) was confirmed. However, the appeal succeeded in part on procedure: the order granting judgment was set aside and substituted with an order striking out the plea with leave to the defendant to amend.

The case authoritatively confirms that personal liability under section 23(2) of the Close Corporations Act is a statutory civil penalty, independent of contract, and that rectification cannot be used to avoid such liability. It reinforces the principle of strict compliance with statutory disclosure requirements in corporate instruments and aligns South African law with established authority under company legislation. The judgment is also significant for reaffirming procedural fairness in exception proceedings by recognising a defendant’s general entitlement to an opportunity to amend a defective plea.