Insolvency : caput 4

• Published date: 01 January 2010
• DOI: 10.10520/EJC74122
• Pages: 98-184
• Date: 01 January 2010

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CAPUT 4

INSOLVENCY

4.1 A partnership of juristic persons1

4.1.1 Introduction

New developments concerning the sequestration of the estate of a

partnership with incorporated members highlight the need to revisit the

contrasting judicial interpretations of section 13 of the Insolvency Act

24 of 1936. This is particularly important in view of the recent decision

of Commissioner, South African Revenue Services v Hawker Air Serv-

ices (Pty) Ltd; Commissioner, South African Revenue Service v Hawker

Aviation Partnership.2 In this judgment the Supreme Court of Appeal

overruled decisions such as P de V Reklame (Edms) Bpk v Gesament-

like Onderneming van SA Numismatiese Buro (Edms) Bpk en Vitaware

(Edms) Bpk3 and reinstated a considered body of jurisprudence.

Section 13 provides that if a court sequestrates the estate of a partner-

ship, it must simultaneously sequestrate the private estate of each part-

ner except an en commandite partner or a partner undertaking and se-

curing payment of the partnership debts. The conundrum discussed in

this contribution is whether section 13 f‌inds application if there is a legal

bar to the sequestration of one or more or all the partners’ estates which

do not fall within the narrow ambit of the express statutory exclusions. At-

tention will also be given to the diverse judicial interpretations of section

13 dealing with the question whether a partnership having incorporated

companies or other bodies corporate as members is susceptible to a

statutory concursus creditorum if it is unable to meet its liabilities.4

In spite of doubts initially expressed in Pavie v The French Bakery Co.,

Ltd 5 there is now no doubt in South African law that an incorporated

company may enter into a partnership with either another company,

a natural person or an existing partnership.6 For this very reason

one of the common powers of a company stated in Schedule 2 to the

Companies Act 61 of 1973 is to enter into a partnership.7

1 Based on Henning “A partnership of companies under the Insolvency

Act: Historical and comparative perspectives on the resolution of a

South African conundrum.” 2009 Tydskrif vir Hedendaagse Romeins-

Hollandse Reg 351-374.

2 2006 4 SA 292 (SCA).

3 1985 4 SA 876 (K).

4 Henning and Delport The South African Law of Partnership (1984)

283-284.

5 1903 TH 5.

6 Henning and Delport 274-275.

7 Cilliers and Benade Company Law 4th ed (1982) 50; Cilliers et al Cor-

porate Law 3rd ed (2000) 33.

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There are many situations in which it may be desirable for a company

to become a member of a partnership. These include where two com-

panies combine their resources to exploit an idea or property through

a joint venture, or the use of a corporate general partner of a partner-

ship en commandite in order to obtain the tax advantages of partner-

ship combined limited liability. A silent partnership may be used when

one or more partners cannot or does not want to appear off‌icially as

such, or as an initial step prior to an open or public joint venture or

when the partners belong to the same group of companies.8

4.1.2 Historical perspectives

4.1.2.1 Roman Dutch Law

During the later Middle Ages the commercial partnership trading un-

der a f‌irm name with a capital fund contributed by the partners be-

came common practice in Italy. The recognition of the concept of the

partnership as a group with its own assets, a collective name and

a common legally binding signature soon led to various distinctions

being drawn between the individual partners on the one hand and

the f‌irm on the other by the lex mercatoria and this ultimately resulted

in the recognition of the f‌irm as a separate entity. This mercantile no-

tion or entity theory of partnership became part of the general legal

theory and practice of France and most other Roman derivative sys-

tems on the Continent during the eighteenth century.9

Duynstee10 emphasised the inf‌luence of French writers on the Ro-

man-Dutch law of partnership. Relying on numerous eminent authori-

ties11 he concluded that as a general rule commercial partnerships

were indeed viewed as entities separate from the individual partners

in eighteenth century French law.12 After considering the relevant

sources in detail, Duynstee concluded that the position in this regard

8 Herzfeld Joint Ventures (1989) 17; Ellison and Wilson “UK Joint Ven-

tures” in Joint Ventures in Europe (1991) 229; Lindsey Corporate Joint

Ventures (1989) 19-24; Wachtershäuser Das Gesellschaftsrecht des

Internionalen Joint Ventures (1992) 28-31. See also Goodman “The

partnership of corporations” 1977 Estate and Trusts Quarterly 286.

9 Henning and Delport 279-280; Henning “Partnership” in Joubert (ed)

The Law of South Africa Vol. 19 (2nd ed 2006) 229-230; Goldschmidt

Universalgeschichte des Handelsrechts (1891) 288-289.

10 Duynstee Vraagstukken (1948) 38.

11 Such as the Rota Genua, Cujacius, Scaccia, Straccha, Savary, Pothier,

Henrys, Toubeau, Bornier, Bourjon, De Boutaric and Levy-Bruhl.

12 This conclusion is also supported by the following passage in Emerigon

Traité des Assurances et des Contrats à la grosse I (1783) 394: La so-

ciété est une personne civile qui a ses droit et ses tributs particuliers.

Les biens de la société considérés dans un certain rapport ne sont pas

les biens des associés considérés en leur particulier. Les créanciers

de l’associé ne sont pas créanciers de la société.

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was similar in Roman-Dutch law.13 He is supported by a signif‌icant

number of modern authors,14 as well as to a greater or lesser extent

by various Roman-Dutch sources. Thus it was advised early in the

eighteenth century that a partnership may be described as an entity

in itself, separate from the partners as individuals.15

13 Duynstee 75.

14 Such as Huusen-De Groot Rechtspersonen in de negentiende eeuw

(1976) 129; Van Brakel De Hollandsche handelscompagnieën (1908)

174; Scholten “Over rechtspersonen” in Versamelde geschriften III (1951)

298; Holtius Voorlezingen over handels- en zeerecht (1870) 102; Die-

phuis Handboek voor Nederlandsch handelsrecht I (1865) 60; Van der

Heijden Naamloze vennootschap in Nederland voor de Codif‌icie (1908)

28; Grooten Vennootschap onder f‌irma (1929) 50; Slagter and Swemmer

“Vennootschap onder f‌irma” in Personenassociaties I (1980) 1.

15 Barels Advysen over den Koophandel en Zeevaert (1781) 2 62 and 2

86 (242-249): “(D)e societeit van C. en A. is een corpus mysticum (een

verbeeld lichaem) en zulks dan ook voor een ander persoon moet worde

geconsidereerd, als A. particulier, zo dat gevolgelyk ‘t geen A. schuldig

zoude mogen zyn, niet gecontraponeerd, of ingehouden kan, of mag,

worden van of tegen het geene de Societeit moet hebben. Zynde dit een

zaeck zo klaer en zeker, beiden na rechten, en na style mercantil, dat het

zoude zyn een kaers op de middach te willen hebben aangestoken, in-

dien men deswegens nog meer adstructie zoude komen te requireeren.”

and that “Als zynde in Rechten en Practycque notoir dat eene Com-

pagnie is een corpus mysticum (een verbeeld lichaem), of een lichaem

op zich zelven, geheel en al verschillende van de Compagnons in hun

particulier, zo dat het geen de Compagnie te eischen heeft, niet gec-

ompenseerd, geretineerd, of belemmerd kan worden voor of uit zaecke,

van dat de Compagnons respectivelyk particulier verschuldigd mogen

zijn.” It was also stressed “Ja zelvs de goederen van de Compagniesc-

hap worden niet gezegd die van de Compagnons te zyn, alvoorens de

schulden van de Compagnieschap betaald zyn. Waerom de Crediteuren,

die met eenig Koopman op uitzicht tot zekeren Negotie gehandeld heb-

ben, zyn gepraefereerd op de goederen en koopmanschappen van die

Negotie, boven een iegelyk Crediteur, die buiten de massa van de Ne-

gotie gehandeld heft.” After a comprehensive analysis of Roman-Dutch

sources, Kohler “Niederlandisches Handelsrechts in der Blutezeit des

Freistaes” 1907 Zeitschrift für das gesammte Handelsrecht 293 empha-

sised: “Im Gesellschaftsrecht ringt sich der Gedanke der Selbständigkeit

des Gesellschaftsvermögens gegenüber dem Privverkehr des Gesell-

schafters siegreich zu Tage. (D)as Vereinigungsrecht geht dem Rechte

der Privgläubiger vor, so dass, wenn der eine Gesellschafter dem Gesell-

schaftsvermögen Geld schuldet, bei der Vereinigung zuerst dieses Pas-

sivum zu decken ist, bevor die Gläubiger des Gesellschafters etwas aus

seinem Anteil erlangen. Darum haben auch die Gesellschaftsgläubiger

ein Voraus in der Deckung ihrer Schulden as dem Gesellscahftsvermö-

gen vor der Privglaubigern des einzelnen Gesellschafters. Der Erwerb

aus dem Gesellscaftsvermögen fällt in die Gesellschaft, auch wenn nicht

ausdrücklich fur die Gesellschaft gehandelt wird.”