By Stef de Gouveia and checked by Mohau Ledwaba
This case dealt with whether the Western Cape High Court (the “Court”) had jurisdiction to hear the application and address the merits of the case. Mfwethu Investments CC t/a Recharger Prepaid Meters (the “Applicant”), sought a final interdict against the Respondent. Due to the fact that the allegedly wrongful conduct did not fall in the Court’s area of jurisdiction, the Court could only hear the matter if Citiq Meters Solutions (Pty) Ltd t/a Citiq Prepaid (the “Respondent”) was present within its jurisdiction. As such, the objection to the Court’s jurisdiction was raised due to the fact that the Respondent’s presence did not fall within the Court’s jurisdiction.
The Applicant and the Respondent are two firms which compete in the wholesale and retail supply of prepaid electricity sub-meters (‘Meters’). The Applicant had its principal place of business in Durban and the Respondent had places of business in both Cape Town as well as Midrand, Gauteng.
The Applicant alleged that the Respondent activated the Applicant’s meters on its (the Respondent’s) platform and supplied particulars of such meters to vendors. In order to rectify reputational harm and to appease customers, the Applicant was forced to buy fresh tokens for the customers or provide for the customers to be transferred to the Respondent’s platform by providing a key-change code.
The Respondent raised a preliminary objection to the Court’s jurisdiction to hear the matter. The Court found the objection to be sound and subsequently did not address the merits of the case but rather the issue in respect of its jurisdiction to hear the matter at all.
The Court began by outlining the basics of determining whether or not courts have jurisdiction and made reference to section 21(1) of the Superior Courts Act 10 of 2013. In addition to this, the common law also determines whether or not a cause ‘arises’ within a court’s jurisdiction; where the residence, and not just physical presence, of a defendant or respondent within the court’s jurisdiction is in most times a circumstance resulting in a court having jurisdiction to hear the merits of a case. This is essentially saying that in determining jurisdiction, a court is required to look at the residence of the defendant or respondent, as opposed to the applicant or plaintiff.
The Applicant argued that the Court had jurisdiction in that the Applicant had offices in Cape Town and therefore was physically present within the Court’s jurisdiction. The Court deemed this argument to be ill-founded and subsequently rejected it, stating that the Court will only have jurisdiction if the Respondent resided within its jurisdiction. Counsel for the Applicant, in attempt to sway the Court to determine its own jurisdiction, relied extensively on the argument of effectiveness, as mentioned in Apleni v African Process Solutions (Pty) Ltd & another. However, the Court again rejected this argument and held that effectiveness may lie at the root of, or be the rationale for common law grounds of jurisdiction, but it is not an independent ground in itself. Although having rejected this argument of effectiveness, the Court accepted that Apleni is authority for the proposition that a court will have authority over a defendant who is resident in its area despite the fact that the delict was committed elsewhere.
The Court acknowledged the fact that the writ of a division of the High Court runs throughout South Africa, so that in principle any division could give an effective judgment against in incola of South Africa who is a peregrinus in that division’s territory, but stated that it is clearly not the law that every division in South Africa has jurisdiction over any person who is resident somewhere in South Africa. In its explanation, the Court compared the legal position in respect of residency of companies before and after the Companies Act 71 of 2008 (the “Act”) came into force.
The legal position before the Act:
The majority judgment in Bisonboard Ltd v K Braun Woodoworking Machinery (Pty) Ltd held that a company resides:
- at its principal place of business in South Africa; and
- at its registered office.
This means that if the principal place of business and the registered office of a company are in different places, the company resides in two places and in the areas of two different jurisdictions.
Where a company had more than one place of business within South Africa, the “principal place of business” would be where the company’s “general administration is centred”, and the “seat of central management and control, from where the general superintendence of its affairs take place”. The Court stated that this does not have to be where its manufacturing or other business operations are carried on. However, if there were to be a dispute in respect of whether a particular place is a company’s principal place of business, it would be determined through evidence as to where the company’s general administration takes place.
Legal position after the Act:
Due to section 23(b) of the Act, if a company has more than one office in South Africa, it has to register the address of its “Principle Office”. The Court made mention of and agreed with the learned Judge, Binns-Ward J, in Sibakhulu Construction (Pty) Ltd v Wedgewood Village Golf Country Estate (Pty) Ltd, whereby he (Binns-Ward J) held that in the new company law regime a company can only be resident in one place in South Africa, namely its registered office. The Court agreed with the ratio and acknowledged that later decisions have not impugned Binns-Ward’s reasoning in respect of matters wholly governed by the new Act and other courts have since followed suit. Section 23(b) of the Act, in the Court’s opinion, provides certainty as to where a company is resident within South Africa and also gives effect to the purposes of the Act, “predictable and effective environment for the efficient regulation of companies”.
The Court also acknowledged that a company’s registered office in terms of section 23(b) of the Act is the registered address as referred to in section 25 and section 28(2) in reference to the location of all company records and accounting records respectively. To conflate a company’s registered office with its principal office cannot be allowed for as companies would then ward off complaints of non-compliance by proving that its registered office is not in fact its principal office and that the records are available at its principal office.
Further, the Court held that third parties are better served by treating the registered office as being dispositive. Therefore, in enquiring where to sue a company, a third party need only to consult the information registered with Companies and Intellectual Properties Commission. To expect third parties to determine where the general administration of a company is centred by means of any other way would be too harsh.
In light of all of the above, the Court held that even if a company may be regarded resident at its principal place of business, which is not its registered office it was still be up to the Applicant to prove that the Respondent’s principal place of business was in Cape Town and not in Midrand. The Applicant alleged such and the Respondent denied same, with neither party providing evidence as to where the general administration of the Respondent was centred. There was insufficient evidence to suggest that the Respondent’s principle place of business was in Cape Town and the prima facie position established by the registration had not been displaced.
The Court concluded that it lacked the required jurisdiction to hear the matter and subsequently dismissed the application with costs, without considering any merits of the case.
The decision of the Court emphasised the importance of ensuring that the Court in which an applicant brings a claim has jurisdiction to hear the matter against a company. The new Act and the common law have made it clear is to when and how courts have jurisdiction over companies. Failure to have said jurisdiction will result in the matter not being heard and incurring additional, unnecessary legal costs.
The correct position, as held by the Court, is that a court can only have jurisdiction to hear the merits of a case whereby the defendant or respondent has its registered office within a court’s area of jurisdiction. In the absence of evidence relating to activities in two or more offices, the prima facie position is that the registered office will be the principal place of business.
A court will only have jurisdiction to hear a matter whereby the respondent’s registered office of business is situated within the court’s area of jurisdiction.
Jurisdiction, High Courts, Principle place of Business, Registered Office, Section 23(b) of the Companies Act 71 of 2008.