Absa Bank Ltd v Kernsig 17 (Pty) Ltd (386/2010) [2011] ZASCA 97; 2011 (4) SA 492 (SCA); [2011] 4 All SA 113 (SCA) (31 May 2011)

Absa Bank Ltd v Kernsig 17 (Pty) Ltd (386/2010) [2011] ZASCA 97; 2011 (4) SA 492 (SCA); [2011] 4 All SA 113 (SCA) (31 May 2011)

The Supreme Court of Appeal held that the allegation of contravention of section 38 of the Companies Act was not properly pleaded or supported by sufficient facts in the affidavits. The facts necessary to determine whether the loan agreement constituted prohibited financial assistance were not before the court. The court a quo erred in finding a contravention of section 38 without a proper factual basis. The appeal was upheld, and the order of the court a quo was set aside and replaced with an order dismissing Kernsig's appeal with costs, including the costs of two counsel.

Citation
[2011] ZASCA 97
Parties
Appellant: Absa Bank Limited; Respondent: Kernsig 17 (Pty) Ltd
Court
Supreme Court of Appeal
Jurisdiction
South Africa
Judgment Date
31 May 2011
Case Number
386/2010
Procedural Posture
Civil Appeal / Appeal From Full Bench of Western Cape High Court
Outcome
Appeal upheld; order of the court a quo set aside and replaced with dismissal of Kernsig's appeal with costs.
Judges
Cloete, Cachalia, Shongwe, Majiedt, Seriti
Legal Topics
Company Law, Section 38 Companies Act, Mortgage Bonds, Financial Assistance for Share Purchase
Commercial and Corporate Company Law Section 38 Companies Act Mortgage Bonds Financial Assistance for Share Purchase

Case Brief

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Parties

Absa Bank Limited

Appellant

Kernsig 17 (Pty) Ltd

Respondent

Procedural Posture

Civil Appeal / Appeal From Full Bench of Western Cape High Court

Legal Issues

  1. 1 Whether the loan agreement between Absa and Kernsig contravened section 38(1) of the Companies Act 61 of 1973.
  2. 2 Whether the mortgage bonds registered against Kernsig's property should be cancelled.
  3. 3 Whether all relevant facts were before the court to determine a contravention of section 38.

Ratio Decidendi

The Supreme Court of Appeal held that the allegation of contravention of section 38 of the Companies Act was not properly pleaded or supported by sufficient facts in the affidavits. The facts necessary to determine whether the loan agreement constituted prohibited financial assistance were not before the court. The court a quo erred in finding a contravention of section 38 without a proper factual basis. The appeal was upheld, and the order of the court a quo was set aside and replaced with an order dismissing Kernsig's appeal with costs, including the costs of two counsel.

Court Disposition

Appeal upheld; order of the court a quo set aside and replaced with dismissal of Kernsig's appeal with costs.

Orders

  • The appeal succeeds with costs, including costs consequent upon the employment of two counsel.
  • The order of the court a quo is set aside and replaced with: 'The appeal is dismissed with costs, which costs will include the costs consequent upon the employment of two counsel.'