Venator Africa (Pty) Ltd vs. Watts and Another - (24 Apr 2024)

Director of a company is liable for any loss, damages or costs sustained by the company as a consequence of any breach by the director

Company

Present appeal concerns the interpretation of Section 218(2) of the Companies Act, 2008. The high court considered and upheld an exception to the particulars of claim, wherein the question whether a creditor could claim against the directors of a company personally, in terms of Section 218(2) read with Section 22(1) of the Act, was raised.

Section 218(2) of Act does not itself create liability. It imposes liability in the event of a contravention of some other provision of the Act. Section 22(1) plainly imposes a duty on the company, and not its directors, to refrain from carrying on its business recklessly, among other things. To construe Section 22(1) as being capable of infringement by the directors is to read into the section a prohibition that is not there. Section 76(3) imposes duties upon the directors to, act in good faith and in the best interests of the company. These are common law principles which have now been entrenched in the Act. These duties are owed to the company. In the event of a wrong done to the company in terms of any of the provisions of the section, the company can sue to recover damages.

Section 77(2)(b) similarly provides that, a director of a company may be held liable in accordance with the principles of the common law relating to delict for any loss, damages or costs sustained by the company as a consequence of any breach by the director of the duty contemplated in Section 76(3)(b); any provision of the Act, not otherwise mentioned in the section; or any provision of the company’s Memorandum of Incorporation. The plaintiff was unable to identify a provision that had been contravened by the directors in order to invoke Section 218(2). In the circumstances, present Court found that it could not fault the high court in upholding the exception. The order of High Court is confirmed. Appeal dismissed.

Tags : DAMAGES DIRECTOR LIABILITY