Mellet NO and Others v Vermeulen and Another (2702/2019) [2020] ZAFSHC 61 (13 March 2020)

Mellet NO and Others v Vermeulen and Another (2702/2019) [2020] ZAFSHC 61 (13 March 2020)

The court found that section 29(1A) of the Close Corporations Act, as amended, permits trustees of an inter vivos trust to hold membership interests in a close corporation, provided no juristic person is a beneficiary and other requirements are satisfied. There was no evidence that the trust failed to meet these requirements. The respondents had legal advice and conducted due diligence before signing the agreement. The contract was not misleading and did not offend the statutory provisions. The agreement is valid and enforceable, and the respondents are obliged to register bonds over the specified properties as security for payment. The counter-application for declaratory relief fails.

Citation
[2020] ZAFSHC 61
Parties
Applicant: Blucher Hauman Mellet N.O; Applicant: Hendrik Francois Mellet N.O; Applicant: Carolina Johanna Prinsloo N.O; Respondent: Marais Rocco Vermeulen; Respondent: Evan Ernest Corbett
Court
Free State High Court, Bloemfontein
Jurisdiction
South Africa
Judgment Date
13 March 2020
Case Number
2702/2019
Procedural Posture
Motion Application / Final Relief; Counter Application for Declaratory Order
Outcome
Application granted; counter-application dismissed with costs.
Judges
NM MBHELE
Legal Topics
Close Corporation Membership, Trusts as Members, Contract Enforceability, Declaratory Relief, Security for Payment
Commercial and Corporate Civil Procedure Close Corporation Membership Trusts as Members Contract Enforceability Declaratory Relief Security for Payment

Case Brief

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Parties

Blucher Hauman Mellet N.O

Applicant

Hendrik Francois Mellet N.O

Applicant

Carolina Johanna Prinsloo N.O

Applicant

Marais Rocco Vermeulen

Respondent

Evan Ernest Corbett

Respondent

Procedural Posture

Motion Application / Final Relief; Counter Application for Declaratory Order

Legal Issues

  1. 1 Can an inter vivos trust hold membership interest in a close corporation under the Close Corporations Act?
  2. 2 Is the sale agreement between the trust and respondents valid and enforceable given the statutory requirements?
  3. 3 Are the respondents obliged to register bonds over specified properties as security for payment?

Ratio Decidendi

The court found that section 29(1A) of the Close Corporations Act, as amended, permits trustees of an inter vivos trust to hold membership interests in a close corporation, provided no juristic person is a beneficiary and other requirements are satisfied. There was no evidence that the trust failed to meet these requirements. The respondents had legal advice and conducted due diligence before signing the agreement. The contract was not misleading and did not offend the statutory provisions. The agreement is valid and enforceable, and the respondents are obliged to register bonds over the specified properties as security for payment. The counter-application for declaratory relief fails.

Court Disposition

Application granted; counter-application dismissed with costs.

Orders

  • The 1st and 2nd Respondents are directed to instruct a conveyancer of their choice to register bonds over the specified properties to the value of R4,504,000.00, pay 50% of the transfer costs, and sign all necessary documentation within 21 days of the order.
  • If the respondents fail to comply, the applicants' attorney is authorised to instruct a conveyancer to register the bonds, pay 50% of the transfer costs, and sign all necessary documentation.