Crous v Wynberg Boys High School and Others

Eastco Travel CC operated as a travel agency. Its members were Herman Mercer Crous (49%) and his daughter, Lorraine Fourie (51%). Wynberg Boys High School contracted with the close corporation, represented by Ms Fourie, to arrange flights for learners to the USA. Ms Fourie conducted a fraudulent scheme by taking upfront payments, cancelling issued tickets, obtaining refunds from airlines, and misappropriating the funds. The school lost R638 880. The school applied to the High Court for winding-up of the close corporation and for an order piercing the corporate veil so that both members, jointly and severally, would be liable. Mr Crous denied involvement in the fraud, stating he was not involved in management, received no benefit, and was unaware of the misconduct. His purported resignation as a member was legally ineffective, so he remained a member at all material times. The High Court held that mere membership rendered him liable under s 65 of the Close Corporations Act. He appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. The High Court’s order was amended so that only Eastco Travel CC (the second respondent) was found to have grossly abused the juristic personality and ordered to pay R638 880 to the school with costs. The application against Mr Crous (third respondent in the High Court proceedings) was dismissed with costs.

The case authoritatively clarifies the scope of personal liability under section 65 of the Close Corporations Act. It confirms that mere membership of a close corporation does not justify piercing the corporate veil and that active participation or contribution to the abuse of juristic personality is required. The judgment reinforces the principle of separate juristic personality and limits unwarranted expansion of member liability.