Ninian & Lester (Pty) Ltd v Perry NO and Others

• Jurisdiction: South Africa
• Judge: Shearer J
• Judgment Date: 31 October 1989
• Citation: 1991 (1) SA 66 (N)
• Hearing Date: 27 September 1989
• Court: Natal Provincial Division

Shearer J:

The applicant is a company which carries on business as a D manufacturer of textiles. The first respondent is the liquidator of Beligton (Pty) Ltd (to which I shall refer as 'the company'). The company was provisionally liquidated on 16 June 1986 and finally liquidated on 3 September 1986. It is still in liquidation. The second respondent carries on business as a development corporation, and is a claimant in the liquidation of the company. The third respondent is the E Master of the Supreme Court of South Africa in this Division.

These proceedings are directed to a review of a decision of the third respondent and a declaration that the first respondent's amended first and final liquidation and distribution account dated 22 March 1989 correctly accounts for certain of the assets referred to therein.

F The history of the matter is as follows. On 7 March 1986 a written contract was concluded between the applicant and the company, which recorded the terms upon which the applicant was to accept material from the company for processing in various ways. The company had previously and over a period delivered material to the applicant for such processing. Clause 9 of the written contract reads as follows:

G 'NL may hold under lien any goods in its possession until its account has been paid, whether such account represents the work done by it on such goods as held by it or in respect of work previously done on other goods already delivered to the customer.'

As at 19 May 1986 the applicant had physical possession of certain H material which the company had delivered to the applicant for such processing. The company's indebtedness as at that date was exclusively in respect of material which had already been delivered to the company during the period November 1985 to April 1986, and in respect of that indebtedness the applicant proved a claim as a creditor in an amount of R24 618,69.

With regard to the material in its possession, part of it had already I been processed by dyeing and finishing and the remainder had not yet been processed in any form. On 19 May 1986 an oral contract was concluded between the applicant and the company in terms of which, inter alia, the company consented to the applicant selling the material for the purpose of reducing the company's liability to the applicant. This was confirmed in a telex message, the relevant part of which reads as J follows:

Shearer J

A 'Old fabrics of Beligton which are now ceded to you will be sold by you... to cover the outstanding account to existing customers and new customers as you see it through the credit point of view. On receipt of payment by yourself from customers, the account will be reconciled and finance charges on late payment of Beligton will be added and the balance will then be paid by you to Beligton.'

The applicant then performed certain further dyeing and finishing work B in respect of the unprocessed part of the material and quantities of the material were sold during the period 10 June to 30 July 1986. It retained possession of each quantity of the material until delivery to the purchaser.

In the meantime of course the company had been placed in provisional liquidation on 16 June 1986, but no-one representing the applicant had C any knowledge of this until 15 August 1986 when a letter dated 31 July 1986 was received from the first respondent. On 12 September 1986 the applicant wrote a letter to the first respondent asserting that the material had been held under a pledge. In further correspondence the first respondent accepted that the applicant was a secured creditor and drew his liquidation and distribution account accordingly. D

The price realised for the portion of the material sold prior to the provisional liquidation was R10 156,65 and it is common cause that the applicant is entitled to retain that as the proceeds of realisation of pledged property.

The second respondent lodged an objection to the first liquidation and E distribution account. This was dated 19 August 1987 and in it the second respondent contended that the pledge contended for by the applicant was open to attack because the applicant 'was not in possession of the assets', because the pledge was not perfected, and because the assets were secured in favour of the second respondent by a notarial bond. The objection was dated 19 August 1987 and no copy of it was received by the F applicant until 14 July 1988. The applicant did not, and had no opportunity to, make any representations to the third respondent before the third respondent ruled thereon.

The first respondent, in letters dated 9 September 1987 addressed to both the second and third respondents, responded to the objections by G saying that in his view the applicant was in possession of the assets, the pledge had been perfected and the assets were not secured in favour of the second respondent in terms of the general notarial bond. The general notarial bond is annexed to the founding affidavit and it purports to cover 'all the mortgagee's movable property'. Annexure A thereto specially describes and enumerates various items of movable H property of the company but does not include the assets with which this application is concerned, namely the material. At no time prior to the liquidation of the company was the second respondent in possession of any of the material.

The third respondent in a letter dated 22 June 1988 upheld the second respondent's objection with regard to the acceptance that the material I had been validly pledged to the applicant, and held...