Ockert Jacobus Steyn and Another v Wernich Venter and Others

The appellants (Steyn and Van Der Merwe) and the first respondent (Venter) were all members of the second respondent, Hartzer and Steyn Beleggings CC. Venter, on behalf of the CC, instituted action under section 50 of the Close Corporations Act against the appellants. Three claims were made: (1) repayment of R4 million from the sale of CC property in 2009, paid to appellants instead of the CC; (2) rental income from 2001-2008 paid to appellants instead of the CC; (3) payments allegedly made to appellants from CC funds from January 2005 to May 2013. The appellants filed a plea of prescription arguing all claims had prescribed as they arose more than 3 years before summons was served. The respondents replied that section 13(1)(e) of the Prescription Act delayed prescription because appellants were members of the CC's governing body.

• Whether claims instituted against the appellants have prescribed by virtue of sections 10(1) read with section 11(d) of the Prescription Act 68 of 1969
• Whether a close corporation has a 'governing body' as contemplated by section 13(1)(e) of the Prescription Act
• If so, whether section 13(1)(e) delayed the completion of prescription against members of the close corporation
• The proper interpretation of 'governing body' in the context of close corporations versus companies

The appeal was dismissed with costs to be paid by the appellants jointly and severally, the one paying the other to be absolved.

Members of a close corporation collectively comprise its 'governing body' for purposes of section 13(1)(e) of the Prescription Act 68 of 1969. Section 13(1)(e), which delays the completion of prescription where the creditor is a juristic person and the debtor is a member of its governing body, applies to close corporations. Section 46 of the Close Corporations Act 69 of 1984 makes every member ipso facto a member of the close corporation's governing body by giving members equal rights in management, representation and decision-making. Where members of a close corporation collectively bear the responsibilities and obligations typically associated with governance (management, representation, and fiduciary duties), they constitute a governing body within the meaning of section 13(1)(e) of the Prescription Act, thereby delaying prescription of debts owed by members to the close corporation.

The Court observed that the section 50 procedure under the Close Corporations Act, which allows a member to institute proceedings on behalf of the corporation against another member, does not negate the impediment contemplated by section 13(1)(e). Using this procedure may have serious consequences including personal costs orders and damage to relationships between members. The Court noted that even if a close corporation is akin to a partnership, section 13(1)(d) delays prescription for partnership debts, and there is no reason why close corporations should not have the same protection. The Court also noted, citing Van Staden v Venter, that litigation between partners during the subsistence of the partnership could be interpreted as a repudiation of the partnership, and this undesirability pertains equally to members of a close corporation. The Court emphasized that the fundamental nature of a close corporation is entrenched in the relationship between members, which involves a legal and ethical relationship of trust.

This case is significant in South African law because it clarifies that section 13(1)(e) of the Prescription Act applies to close corporations, not just companies. It establishes that members of a close corporation collectively constitute its 'governing body' for prescription purposes, despite the different structural characteristics between close corporations and companies. The judgment confirms that close corporations receive the same protection under section 13(1)(e) as companies and partnerships, recognizing the fiduciary relationships and trust between members that make litigation during the subsistence of the relationship undesirable. This promotes consistency in the application of prescription law across different forms of business entities and protects the integrity of close corporation relationships.