Investec Bank Limited v Quick Leap Investments 34 (Pty) Ltd (56438/2010) [2014] ZAGPPHC 956 (27 November 2014)

Investec Bank Limited v Quick Leap Investments 34 (Pty) Ltd (56438/2010) [2014] ZAGPPHC 956 (27 November 2014)

The court found that the suretyship and mortgage bond executed by the defendant company for the personal debt of its director were void and unenforceable due to non-compliance with section 226 of the Companies Act 61 of 1973. The statute requires prior consent of all members, which in this case meant both trustees of the Leap Trust, the sole shareholder. There was no evidence of such consent, nor any delegation of authority by one trustee to the other. Article 61 of the defendant's Articles of Association could not override the statutory prohibition, and the Turquand rule was inapplicable where the law expressly requires shareholder consent. As a result, the plaintiff's claim was...

Citation
[2014] ZAGPPHC 956
Parties
Plaintiff: Investec Bank Limited; Defendant: Quick Leap Investments 34 (Pty) Ltd
Court
North Gauteng High Court, Pretoria
Jurisdiction
South Africa
Judgment Date
27 November 2014
Case Number
56438/2010
Procedural Posture
Civil Trial / Final Judgment
Outcome
Plaintiff's claim dismissed; defendant's counterclaims upheld.
Judges
D.P.J. Rossouw
Legal Topics
Suretyship, Mortgage Bond, Companies Act Section 226, Shareholder Consent, Turquand Rule, Trust Shareholding
Commercial and Corporate Land and Property Suretyship Mortgage Bond Companies Act Section 226 Shareholder Consent Turquand Rule Trust Shareholding

Case Brief

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Parties

Investec Bank Limited

Plaintiff

Quick Leap Investments 34 (Pty) Ltd

Defendant

Procedural Posture

Civil Trial / Final Judgment

Legal Issues

  1. 1 Whether the defendant is bound by the suretyship and mortgage bond, or whether they are void under section 226 of the Companies Act 61 of 1973.
  2. 2 Whether security was provided for a purpose other than the main object of the defendant company.
  3. 3 Whether all members of the defendant company consented to the provision of security for the loan.

Ratio Decidendi

The court found that the suretyship and mortgage bond executed by the defendant company for the personal debt of its director were void and unenforceable due to non-compliance with section 226 of the Companies Act 61 of 1973. The statute requires prior consent of all members, which in this case meant both trustees of the Leap Trust, the sole shareholder. There was no evidence of such consent, nor any delegation of authority by one trustee to the other. Article 61 of the defendant's Articles of Association could not override the statutory prohibition, and the Turquand rule was inapplicable where the law expressly requires shareholder consent. As a result, the plaintiff's claim was...

Court Disposition

Plaintiff's claim dismissed; defendant's counterclaims upheld.

Orders

  • Plaintiff's claim is dismissed with costs.
  • The suretyship agreement, Annexure 'D' to the Particulars of Claim, is declared void and of no force and effect.