Barclays National Bank Ltd and Another v Natal Fire Extinguishers Manufacturing Co (Pty) Ltd and Others

• Jurisdiction: South Africa
• Court: Durban and Coast Local Division
• Judge: Didcott J
• Judgment Date: 15 April 1982
• Citation: 1982 (4) SA 650 (D)
• Hearing Date: 28 January 1982

Didcott J:

The respondents are five companies associated with one E another. According to the evidence before me, they are all in deep financial trouble and, what is more, left without directors, theirs having resigned some time ago and not having been replaced. If this is true, and I have no reason to doubt it, the case for an order liquidating them looks strong.

F Liquidation is not, however, the object of these proceedings. The two applicants, or either for that matter, could certainly have asked for it. Each respondent is in debt to them both, and heavily so. But they have not chosen that remedy. Instead they are intent on gaining control of the respondents' businesses for themselves. Their interests would best be protected, they believe, were they to succeed in doing so. To G that end they seek to enforce notarial bonds they hold, securing the payment of the amounts the respondents owe them. These, they maintain, entitle them to seize, operate and dispose of the businesses, with the Court's authority at all events.

There are two notarial bonds, one in favour of each applicant. They rank H pari passu. Each identifies its own holder and records the particular amount of indebtedness it covers. Otherwise, as far as I can see, they are identical. Both were passed by the five respondents and four additional companies in the same group, acting jointly and labelled collectively as the single mortgagor. Both defined the assets hypothecated as -

'... all the mortgagor's movable property and effects, such as the mortgagor both now possesses and in future becomes possessed of, without any exception.'

Neither 'specially described and enumerated' the hypothecated property,

Didcott J

for the purposes of s 1 (1) of the Notarial Bonds (Natal) Act 18 of 1932. Neither, it follows, is governed by that legislation.

A Clause 15 of each bond equipped the mortgagee with formidable powers. Those relevant to the present litigation are to be found in paras (ii) and (v) of the clause. Paragraph (ii) allowed the mortgagee -

'... to take and retain possession of the business and/or any of the movable assets of the mortgagor and to retain such possession for so long as the mortgagee may deem fit, and to sell and dispose of such business assets or any portion thereof in such manner and on such terms B as the mortgagee may decide, and to convey valid title to the purchaser/s or transferee/s, and/or to collect in all moneys due and owing to the mortgagor in connection with its business or otherwise, and for all these purposes this bond shall operate irrevocably and in rem suam as a power of attorney in favour of the mortgagee,... and without in any way restricting the generality of this provision:

(1)

to operate and draw on the banking account of the mortgagor, and C to instruct that all funds in such account or which may be paid into such account be paid to the mortgagee or be not withdrawn therefrom except by or to the order of the mortgagee;

(2)

to sign or subscribe on behalf of the mortgagor to all applications for transfer of licences, quotas, permits, registration certificates and the like;

(3)

to sue any or all debtors of the mortgagor in the name of either D the mortgagee or the mortgagor, as the mortgagee thinks fit, and for the purposes of such actions this bond shall, if the mortagee so elects, operate as a cession in its favour;

(4)

to sign and complete all forms, declarations, agreements and the like as may be necessary or desirable to record the sale, disposal and/or transfer, as the case may be.'

E In addition the mortgagee was entitled under para (v) -

'... to take possession of and to realise, by public auction or by private treaty or otherwise, all or any of the movable assets of the mortgagor.'

None of these powers, one notices however, could be exercised at the F mortgagee's whim. Each was available to it in special circumstances only, in one or another of a number of events or situations clause 15 described.

Contending that one such situation had developed, the applicants obtained a rule nisi, which I must now decide whether to confirm or discharge. It was served on the respondents and published for the information of their creditors. Nobody has entered the lists to oppose G its confirmation. That none of the respondents has done so is hardly surprising. Without directors, they are incapacitated for all practical purposes from litigating.

Paragraph (b) of the rule nisi had to do with some cessions in securitatem debiti, a topic I have not yet mentioned which has no H bearing on the attempt to enforce the bonds and will be put aside for the time being. Paragraph (a) was the one in point, as far as the bonds went. It called on all concerned to show cause, if any, why the applicants should not be authorised:

'(i)

to enter upon and take possession by themselves or their nominee/s of the businesses and the movable assets of the respondents, and to hold such as security for all amounts owing by the respondents to them;

(ii)

to carry on the businesses of the respondents in the names and

Didcott J

at the cost and expense of the respondents and, at such cost, to do all such things as they may consider advisable for the purposes of the continuation of such businesses;

(iii)

at their discretion, and at such time as they may deem fit, A to sell and dispose of the licences, businesses and assets of the respondents either as going concerns or piecemeal, and either by public auction or private treaty, and upon such terms as they may deem fit;

(iv)

to exercise in rem suam all or any rights of the respondents, B and to apply the proceeds resulting from such sale or from the conduct of the businesses towards the payment and discharge of the indebtedness of the respondents to them;

(v)

to draw and endorse cheques;

(vi)

to apply for and procure transfer of any licences and any C rights under any lease or tenancy into the name of any purchaser, and to sign all documents necessary to effect transfer to such purchaser and to sub-let or cede and assign such rights under such lease or tenancy;

(vii)

in the names of the respondents to ask for, demand, sue for D and recover, of and from any debtor of the respondents, all and singular the debts and monies owing by such debtor to the respondents;

(viii)

to exercise all or any of the powers conferred upon them under and in terms of certain notarial general covering bonds registered in the office of the Registrar of Deeds, Natal, on 12 December 1980 under numbers BN 33139/80 and 33140/80.'

E The bonds to which this last subparagraph alluded were the two in question.

The applicants' counsel, Mr Bristowe, submitted that para (a) of the rule nisi had gone no further than the measures sanctioned, either F explicitly or implicitly, by the excerpts I have quoted from clause 15. Whether such was the case in all respects was one of the problems posed by the form of para (a) which he canvassed in argument. Another was the vulnerability of subparas (i) and (viii) to the criticisms levelled at blanket-like prayers of that kind in Hymie Tucker Finance Co (Pty) Ltd v G Alloyex (Pty) Ltd 1981 (4) SA 175 (N) at 176H and 177A - B. Then the prolixity of much of para (a) struck one. So did the looseness of subparas (v) and (vi). Each could have done with the insertion, where appropriate, of some such wording as 'on behalf of the respondents'. Mere details, however, these were. More important questions await consideration. They must be answered before the fine print matters.

H The first such question is the fundamental one whether relief of the sort and with the scope envisaged by para (a) of the rule nisi is obtainable in principle. Postulated, of course, is the mortgagee's contractual right to do what the Court is asked to authorise. Without that basis for his claim, he has none. Whether the Court will recognise and enforce the right is, however, the question.

FANNIN J answered it affirmatively in International Shipping Co (Pty) Ltd v Hi - Fi Installations (Natal) (Pty) Ltd, a case in this Division numbered

Didcott J

M 19/77 which he decided on 14 January 1977. His judgment has never been reported. He was concerned with a notarial bond indistinguishable for A present purposes from the two before me. It too fell outside the Notarial Bonds (Natal) Act. The order for which para (a) of the present rule nisi provides strongly resembles and was no doubt modelled on the one sought and granted on that occasion. The differences that catch the eye are not material. VAN REENEN J had made a similar order in the B Transvaal Provincial Division on 11 January 1977 without, as far as I can tell, giving reasons for it. FANNIN J referred to the case in which that had happened, one called International Shipping Co (Pty) Ltd v Hi - Fi Installations (Pty) Ltd and numbered M 32/77. It is likewise unreported, but a copy of VAN REENEN J's order lies in the file of the local case, counsel having presumably produced it for the information C of FANNIN J.

In his judgment FANNIN J reviewed a number of earlier decisions on claims by mortgagees to the movable property hypothecated in their favour. These included Paruk v Glendale Estate Co 1924 NPD 1 and Pietersburg Cold Storage Ltd v Cacaburas 1925 TPD 295 in which such D claims had succeeded, and Gundelfinger v Drake and Co (1906) 27 NLR 610 and Williams (Pty) Ltd v Gounden 1960 (1) SA 797 (D) in which they had not. The...