The continued relevance of the Turquand Rule under the current company law regime in South Africa

• Jurisdiction: South Africa
• Author: Mujulizi, J.
• Date: 28 October 2020
• Pages: 54-65
• Published date: 28 October 2020
• Citation: (2020) 6(1) JCCL&P 54

54

THE CONTINUED RELEVANCE OF

THE TURQUAND RULE UNDER THE

CURRENT COMPANY LAW REGIME

IN SOUTH AFRICA

JACQUILINE MUJULIZI*

Advocate of the High Court of Tanzania

ABSTRACT

The statutory enactment of the Turquand rule in s 20(7) of the

Companies Act 71 of 2008 raises questions about the continued

relevance of the common-law Turquand rule in South African law. As

the common-law rule addresses aspects of the accepted presumption

that can, legitimately, be made by third parties on the company’s

compliance with procedural or administrative requirements, its

continued relevance and application can hardly be questioned, as

argued in this article.

Key words: Turquand rule; section 20(9) of the Companies Act, 2008;

common law; South Africa

I INTRODUCTION

The Turquand rule has for a long time caused much confusion in

South African law. This confusion began in English law, and slowly

ventured into our law. The common-law Turquand rule stemmed

from the English case of Royal British Bank v Turquand1 and has

existed for decades. In terms of this rule, third parties are entitled

to assume that an agent of the company has followed and fulfilled

all internal formalities and obtained all approvals before concluding

a contract on that company’s behalf. In other words, the Turquand

rule ‘prevents a company from avoiding liability on an unauthorised

contract due to non-compliance with an internal requirement’.2

The common-law Turquand rule in South Africa has been addressed

by a number of academics and judges alike, with the recent case of

*LLB (with distinction) LLM candidate (Wits).

1 Royal British Bank v Turquand 1856 (6) E&B 327.

2 Etienne Olivier ‘The Turquand rule in South African company law: Another

suggested solution’ (2019) 5(2) JCCL&P 2.

(2020) 6(1) JCCL&P 54

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