Badenhorst N O v Manyatta Properties Close Corporation and Others

The applicant, J J Badenhorst N O, was the executor of the estate of Ernst Hendrik de Witt, who held a 50% member's interest in Manyatta Properties Close Corporation. The other 50% was held by Phillip Cornelius de Witt. In September 2014, Mr de Witt signed a deed of sale purportedly on behalf of Manyatta, transferring immovable property (Portion 33 of the Farm Rietfontein) to Nikifon (Pty) Ltd for R1.3 million, without obtaining the written consent of the deceased's estate/executrix as required by s 46(b)(iv) of the Close Corporations Act 69 of 1984. Transfer was registered in October 2014. In March 2021, the applicant launched proceedings to set aside the sale and transfer, alleging fraud, collusion, lack of authority and statutory non-compliance, and seeking vindicatory and declaratory relief plus cancellation of subsequent servitudes. The high court dismissed the application, finding the applicant lacked locus standi to vindicate property owned by the corporation, and awarded punitive costs de bonis propriis against him on an attorney and client scale. The full court treated the claim as declaratory but dismissed the appeal on prescription, finding no fraud, and failed to deal with the appeal against the costs order. The applicant sought special leave to appeal to the Supreme Court of Appeal.

• Whether the applicant, as executor of a deceased member's estate, had locus standi to institute a rei vindicatio or declaratory action in respect of immovable property owned by the close corporation.
• Whether the sale and transfer were invalid due to the absence of written consent under s 46(b)(iv) of the Close Corporations Act 69 of 1984.
• Whether s 54(2) of the Close Corporations Act protected Nikifon as a bona fide purchaser despite the member's lack of actual authority.
• Whether the claim had prescribed.
• Whether a derivative action under s 50(1)(b)(i) or at common law was available against a third party.
• Whether the high court and full court erred procedurally and substantively in awarding and upholding costs de bonis propriis against the applicant.

The application for special leave to appeal was granted only in respect of the orders of costs de bonis propriis and otherwise refused. The appeal against the costs orders was dismissed, save for an amendment: the full court order was set aside and substituted to dismiss the appeal with costs, and the high court order was varied to remove the second respondent. The applicant was ordered to pay the costs of the fourth, fifth, sixth, seventh, ninth to eleventh and fifteenth respondents on an attorney and client scale de bonis propriis. The applicant was also ordered to pay the fourth, fifth, sixth, seventh and fifteenth respondents' costs in the appeal on the ordinary scale, including the costs of two counsel where employed.

1. Under s 54(2) of the Close Corporations Act 69 of 1984, a close corporation is bound by a member's act in a transaction with a third party unless the member had no actual authority and the third party knew or ought reasonably to have known of that lack of authority; a bona fide purchaser who reasonably relies on the member's apparent authority and on conveyancers to ensure formal compliance is protected, and the shortcomings of conveyancers are not imputed to the purchaser. 2. An executor holding a member's interest in a close corporation does not have standing to bring a rei vindicatio in respect of immovable property owned by the corporation. 3. A court's failure to consider a party's submissions on a prospective punitive costs order, and a full court's failure to adjudicate an appeal against such an order, constitute material irregularities that violate the right to a fair hearing under s 34 of the Constitution and justify the grant of special leave to appeal. 4. An appellate court may substitute a costs order where lower courts failed to exercise their discretion judicially due to procedural irregularities, and it may determine the appropriate costs order itself to achieve finality.

1. Koen JA's observations that the second respondent's conduct in signing a power of attorney and resolution falsely representing that he was authorised by a resolution of all members of the close corporation was prima facie fraudulent, and that the papers should be referred to the Director of Public Prosecutions to consider whether criminal proceedings should be instituted. 2. Observations regarding the duties of conveyancers under ss 15 and 15A of the Deeds Registries Act 47 of 1937 and Regulation 44A to verify the authority of persons signing transfer documents and the accuracy of resolutions, and that awarding costs in favour of conveyancers who failed in these duties could risk being construed as implied approval of their conduct. 3. Observations that the applicant's withdrawal of fraud allegations before the SCA and the crystallisation of legal argument during the course of litigation did not, without more, warrant further punitive costs in the appeal.

The judgment clarifies the interplay between internal authority requirements for close corporations under s 46(b)(iv) of the Close Corporations Act and the protection afforded to bona fide third parties under s 54(2), confirming that a purchaser who reasonably relies on a member's apparent authority is protected even if actual authority is lacking, and that the knowledge or negligence of conveyancers is not automatically attributed to the purchaser. It reaffirms that the rei vindicatio is available only to the owner of property and that an executor of a deceased member's estate does not acquire standing to vindicate property registered in the corporation's name. The case also underscores the exceptional nature of punitive costs de bonis propriis and the procedural fairness requirement that courts must consider parties' submissions before awarding such costs and must give reasons when dismissing an appeal against them, failing which a material irregularity justifying appellate intervention arises. Finally, it highlights the statutory duties of conveyancers under the Deeds Registries Act 47 of 1937 and its regulations to verify the authority of persons signing transfer documents.