Lawclaims (Pty) Ltd v Rea Shipping Co Sa: Schiffscommerz Aussenhandelsbetrieb Der Vvb Schiffbau Intervening

• Jurisdiction: South Africa
• Judge: James JP, Van Heerden J and Milne J
• Judgment Date: 17 July 1979
• Citation: 1979 (4) SA 745 (N)
• Hearing Date: 13 June 1979
• Court: Natal Provincial Division

James JP:

The appellant applied unsuccessfully to THIRION J for an order placing the respondent under provisional liquidation. In the alternative H it applied for its sequestration in terms of the Insolvency Act and that was also refused. It now seeks to reverse these decisions in this Court.

At the hearing before the Court a quo only the applicant was epresented and the respondent and other interested parties did not have notice of the application. At the hearing of the appeal the Schiffscommerz company sought, and was granted, leave to intervene. The appellant did not oppose this application.

In this judgment I shall refer to the appellant as Lawclaims, the respondent as Rea Shipping and the intervening creditor as Schiffscommerz and, as a preliminary to considering the law, it will be convenient at

James JP

this stage to set out the background facts which are relevant to these proceedings. Most of these facts are common cause and the remainder do not appear to be disputed.

A Rea Shipping is a company duly registered in the Republic of Liberia with its registered office in Monrovia. It is a so-called "one ship company" in that its only substantial asset is a vessel named Condor. The Condor was constructed at the instance of Schiffscommerz and sold to Rea Shipping in B October 1975 and commissioned in June 1977. Schiffscommerz secured the balance of the purchase price, amounting to over R7 000 000, by way of a first preferred ship mortgage registered at New York on 29 June 1977 by the Liberian Deputy Commissioner of Maritime Affairs. A second bond over Condor was also registered on behalf of the Banque 1'Indochine et de Suez. While Condor was lying in Durban harbour where it had called in the course C of an ordinary voyage for the purpose of taking on fuel and of loading and discharging cargo it was attached by order of the Durban and Coast Local Division on 23 March 1979. This attachment was made at the instance of Lawclaims in order to found jurisdiction and, thereafter, an edictal citation was issued in which the sum of R2 692 318,41 was claimed. D Lawclaims is an incola of Durban and its claim was founded on a cession it had taken from a company called Interpool Ltd. Interpool is a container leasing company with its head office in New York and amongst its customers were certain foreign shipping companies which leased containers from Interpool on a daily basis. Rea Shipping was one of the guarantors of E these companies and Interpool now claims that it has become entitled to recover the sum of R2 692 318,41 from it by reason of the fact that the debtor companies have failed to pay the amounts due and, as a result, it can claim payment from Rea Shipping in terms of the guarantee. However, Interpool ceded its right to Lawclaims and it was Lawclaims that obtained the order of attachment on 23 March 1979, and on 12 April applied for the F winding-up of Rea Shipping. On the same day, but after the application for winding-up had commenced, Condor was arrested in Admiralty actions in rem firstly by the master of the ship for wages and disbursements and thereafter by Schiffscommerz for its claim under the bond amounting to R7 566 979,20. In addition it was arrested in two further Admiralty actions by members of the crew and by a company which supplied the ship with necessaries while in Durban harbour.

G Subsequently, in terms of an order granted by this Court sitting as an Admiralty Court, Schiffscommerz expended further sums totalling R125 104,93 in respect of crew's wages, necessaries and insurance premiums.

H It is common cause that Condor is not worth more than 8 000 000 American dollars and that it is unlikely that the proceeds of its sale would satisfy even the Schiffscommerz's first preferred mortgage.

Lawclaims approached the Court for a winding-up order on the basis that since Rea Shipping was a one ship company it had been shown that its liabilities exceeded its assets, that it could not pay its debts and that it would be to the benefit of all creditors if a liquidator were appointed to protect the interests of all of them.

THIRION J, however, dismissed this application and the supplementary alternative application which requested the Court, if it was not prepared to wind-up the company, to order its liquidation as a "debtor" in terms

James JP

of s 149 (1) (a) of the Insolvency Act 24 of 1936 read with the definition of "debtor" found in s 2 of the aforesaid Act. THIRION J dismissed both applications because he came to the conclusion that the A Companies Act and the Insolvency Act did not give the Court jurisdiction either to wind-up or liquidate Rea Shipping.

At the commencement of the hearing of the appeal against this decision Mr Shaw, on behalf of Schiffscommerz, submitted that the decision of the Court a quo was not appealable. In this regard he referred the Court to s 150 (1) and (5) of Act 24 of 1936 which provides:

B "150 (1) Any person aggrieved by a final order of sequestration or by an order setting aside an order of provisional sequestration may appeal against such order.............

(5) There shall be no appeal against any order made by the Court in terms of this Act, except as provided in this section."

Mr Shaw submitted that the above provisions effectively barred the appeal C against the refusal to grant an order of liquidation.

He submitted further that in the special circumstances of this case the refusal to make an order for the winding-up of Rea Shipping was also not appealable. He pointed out that no provision is made in the Companies Act 61 of 1973 for appeals against a decision to refuse a winding-up order, but that, since Lawclaims has based its claim for such an order upon Rea D Shipping's inability to pay its debts, s 339 of Act 61 of 1973 came into operation which laid down that in such a case the law relating to insolvency was to be applied. This brought s 150 (5) of Act 24 of 1936 into operation and the refusal to grant a winding-up order was therefore equally not appealable.

E While it is true that s 150 (5) has been interpreted as laying down that no right of appeal exists against an order refusing such an application (see Bhamjee Ltd v Van Harte 1959 (4) SA 174 (T) and Mars The Law of Insolvency 6th ed at 130), there seems to be a clear distinction between a decision on the merits of the case (eg whether an act of insolvency has been established or whether sequestration would be to the benefit of F creditors) and a decision based on the question whether the Court has jurisdiction to hear the case at all. In the former case there can be no doubt that the decision to refuse an order of liquidation would not be appealable as the order was clearly made in terms of the Act.

Mr Gordon, who appeared on behalf of Lawclaims, however, submitted that an order based on a matter of jurisdiction should not be regarded as having G been made in terms of the Act and that it was accordingly appealable. I find myself unable to agree with this view. THIRION J concluded that he did not have jurisdiction to consider the matter because of the provisions of the Act itself. This decision was based on a consideration of the term "debtor" as defined in s 1 of Act 24 of 1936 and he came to the conclusion that Rea Shipping did not fall within the terms of that definition and H that he accordingly had no power to sequestrate it. In fact s 12 (2) obliges the Court to dismiss the petition for sequestration, inter alia, if it is not satisfied that the petitioning creditor has established against the debtor such a claim as is mentioned in s 9 (1). Section 9 (1) refers to a creditor who has a claim against "a debtor". If Rea Shipping is not "a debtor" then Lawclaims did not have such a claim and it was therefore in terms of s 12 (2) that the Court dismissed the petition. This was therefore a decision made in terms of the Act just as much as a decision upon the merits would have been one made in terms of the Act and,

James JP

in my view, s 150 (5) applies equally to it. It follows that in my view the decision of THIRION J that he did not have jurisdiction to sequestrate Rea Shipping is not appealable.

A Different considerations apply in regard to the proposed winding-up of Rea Shipping. In deciding whether he had jurisdiction to liquidare Rea...