Millman NO v Twiggs and Another

• Jurisdiction: South Africa
• Judge: Hefer JA, Vivier JA, M T Steyn JA, F H Grosskopf JA, Schutz JA
• Judgment Date: 26 May 1995
• Docket Number: 610/93
• Court: Appellate Division
• Hearing Date: 12 May 1995
• Citation: 1995 (3) SA 674 (A)

Hefer JA:

When a right is ceded with the avowed object of securing a debt the cession is regarded as a pledge of the right in question: dominium of H the right remains with the cedent and vests upon his insolvency in his trustee, who is under the common law entitled to administer it 'in the interests of all the creditors, and with due regard to the special position of the pledgee'. (Per Innes JA in National Bank of South Africa I Ltd v Cohen's Trustee 1911 AD 235 {dictum at 250 appl} at 250.) These principles have recently been reaffirmed, inter alia, in Leyds NO v Noord-Westelike Koöperatiewe Landboumaatskappy Bpk en Andere 1985 (2) SA 769 (A) {appl}, Bank of Lisbon and South Africa Ltd v The Master and Others 1987 (1) SA 276 (A) {appl} and Land- en Landboubank van Suid-Afrika v Die Meester en Andere 1991 (2) SA 761 (A) {dictum at 771E-F appl}.

In the present case a right was ceded as security for two separate debts - J the one owing to the cessionary by the cedent and the other

Hefer JA

A owing to him by an outsider. The parties are agreed that, upon the insolvency of the cedent, the cessionary is entitled to preferential treatment in regard to the cedent's own debt. The issue is whether he is entitled to similar treatment in regard to the outsider's debt.

When the cession was executed during March 1991

(1)

Continental Foods (Pty) Ltd ('Continental') owed the present first B respondent ('Twiggs') an amount of R200 000;

(2)

Brian Harry Cohen ('Cohen') owed Twiggs an amount of R300 000; and

(3)

Tuna Marine Foods (Pty) Ltd ('Tuna Marine') owed Continental an amount of R500 000.

C These debts will hereinafter be referred to as 'Continental's debt', 'Cohen's debt', and 'the ceded debt' respectively. They were all payable on 30 June 1992. The relevant part of the cession reads as follows:

'1.

Continental Foods hereby cedes, assigns and makes over to Twiggs in securitatem debiti all Continental Foods' right, title and interest D in and to 2/5ths of the claim for the sum of five hundred thousand rand (R500 000) which is so payable by Tuna Marine to Continental Foods on 30 June 1992.

2.

Continental Foods hereby cedes, assigns and makes over to Twiggs in securitatem debiti all Continental Foods' right, title and interest in and to 3/5ths of the claim for the sum of five hundred thousand rand (R500 000) which is so payable by Tuna Marine to Continental Foods on 30 June 1992.

3.

E Pursuant to and in implementation of clauses 1 and 2, it is agreed that the said cession, assignment and making over in securitatem debiti are for the sum of five hundred thousand rand (R500 000).'

Continental was wound up by order of Court during September 1991 on account of its inability to pay its debts. The appellant is the F liquidator. Twiggs proved a claim for R200 000 in respect of Continental's debt which the appellant admitted as a secured claim by virtue of the security afforded by clause 1 of the cession. His disclaimer of Twiggs's right to similar treatment in relation to a further amount of R300 000 by virtue of clause 2 of the cession led to an application for a declaration of rights brought by Twiggs in the Cape Provincial Division. While the G application was pending it came to Twiggs's knowledge that Tuna Marine had paid the entire ceded debt to the appellant. Precisely when this occurred does not emerge from the papers; nor has it been revealed how it came about that Tuna Marine followed this...