Kenmore Equipment CC v Barnard and Another (45064/2018) [2020] ZAGPJHC 130 (26 March 2020)

Kenmore Equipment CC v Barnard and Another (45064/2018) [2020] ZAGPJHC 130 (26 March 2020)

The court held that the close corporation was deregistered at the time the agreements were purportedly entered into, and therefore had no legal existence. As a result, any acts or contracts entered into on behalf of the CC were void. Sections 64 and 65 of the Close Corporations Act presuppose the existence of a close corporation and cannot be invoked where the entity has ceased to exist. The referee's award, based on a void agreement, cannot be made an order of court. There is no basis to hold the respondents personally liable under the Close Corporations Act for the debts of a non-existent entity. The application was accordingly dismissed.

Citation
[2020] ZAGPJHC 130
Parties
Applicant: Kenmore Equipment CC; Respondent: Barnard, Marius Carl; Respondent: Barnard, Maria Elizabeth
Court
South Gauteng High Court, Johannesburg
Jurisdiction
South Africa
Judgment Date
26 March 2020
Case Number
45064/2018
Procedural Posture
Urgent Application / Application to Make Referee's Award an Order of Court and to Declare Respondents Personally Liable Under Close Corporations Act
Outcome
Application dismissed with costs limited to necessary disbursements for the self-represented respondents.
Judges
MA Wesley
Legal Topics
Close Corporations Act, Piercing Corporate Veil, Personal Liability of Members, Void Contract, Referee Award Enforcement
Commercial and Corporate Civil Procedure Close Corporations Act Piercing Corporate Veil Personal Liability of Members Void Contract Referee Award Enforcement

Case Brief

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Parties

Kenmore Equipment CC

Applicant

Barnard, Marius Carl

Respondent

Barnard, Maria Elizabeth

Respondent

Procedural Posture

Urgent Application / Application to Make Referee's Award an Order of Court and to Declare Respondents Personally Liable Under Close Corporations Act

Legal Issues

  1. 1 Whether the referee's award can be made an order of court when the close corporation was deregistered at the time of contracting.
  2. 2 Whether the first and second respondents can be held personally liable under sections 64 and 65 of the Close Corporations Act for the debts of the deregistered close corporation.
  3. 3 Whether the agreement to refer the dispute to a referee is valid and enforceable.

Ratio Decidendi

The court held that the close corporation was deregistered at the time the agreements were purportedly entered into, and therefore had no legal existence. As a result, any acts or contracts entered into on behalf of the CC were void. Sections 64 and 65 of the Close Corporations Act presuppose the existence of a close corporation and cannot be invoked where the entity has ceased to exist. The referee's award, based on a void agreement, cannot be made an order of court. There is no basis to hold the respondents personally liable under the Close Corporations Act for the debts of a non-existent entity. The application was accordingly dismissed.

Court Disposition

Application dismissed with costs limited to necessary disbursements for the self-represented respondents.

Orders

  • The application is dismissed.
  • The applicant is ordered to pay the necessary disbursements of the first and second respondents.