Paterson NO v Kelvin Park Properties CC

• Jurisdiction: South Africa
• Judge: Leach J
• Judgment Date: 10 July 1997
• Citation: 1998 (2) SA 89 (E)
• Docket Number: 1267/96
• Hearing Date: 24 June 1997
• Counsel: TM Chemaly for the plaintiff MJ Lowe for the defendant
• Court: Eastern Cape Division

Leach J:

The plaintiff sues in his capacity as trustee in the insolvent estate of one Saint Michael Schutte ('the H insolvent') who was sequestrated by way of a provisional order issued by this Court on 9 June 1994 and confirmed on 14 July 1994. Prior to his sequestration, the insolvent was the sole proprietor of a butchery business which he ran under the name and style of Model Butchery in Stutterheim. This business was conducted upon the immovable property owned by him known as erf 3475, Stutterheim. On 26 April 1994, ie just over a month prior to his estate I being placed under provisional sequestration, the insolvent entered into two written contracts of sale with the defendant. In terms of the first agreement, annexure A to the particulars of claim, he sold the defendant erf 3475 for the sum of R96 420 payable in cash upon J

Leach J

A registration of transfer. Under the second agreement, annexure B to the particulars of claim, he sold the defendant various items of equipment reflected in a schedule thereto which had been used in the butchery business. These movables were delivered to the defendant prior to the insolvent's sequestration. Somewhat surprisingly, transfer of the immovable property was registered on 9 May 1994, some two weeks after the sale was concluded and B substantially sooner than one would generally expect. Be that as it may, the fact remains that both the movable and immovable assets which the insolvent sold had been transferred to the defendant before the date of sequestration.

After his appointment as trustee in the insolvent's estate, the plaintiff instituted these proceedings relying upon s C 34(1) of the Insolvency Act 24 of 1936 ('the Act') which provides:

'(1) If a trader transfers in terms of a contract any business belonging to him, or the goodwill of such business, or any goods or property forming part thereof (except in the ordinary course of that business or for securing the payment of a debt), D and such trader has not published a notice of such intended transfer in the Gazette, and in two issues of an Afrikaans and two issues of an English newspaper circulating in the district in which that business is carried on, within a period not less than 30 days and not more than 60 days before the date of such transfer, the said transfer shall be void as against his creditors for a period of six months after such transfer, and shall be void against the trustee of his estate, if his estate is E sequestrated at any time within the said period.'

In formulating his claim, the plaintiff alleged that the insolvent had been a 'trader' within the meaning of the section at the time of the sales, that erf 3475 and the butchery equipment sold to the defendant had formed part of the insolvent's business, that the sales had not been made in the ordinary course of such business, that the insolvent had F failed to cause proper publication of notice of such sales as required by s 34 of the Act, and that the defendant was therefore obliged to retransfer the immovable property to the plaintiff and to return the movable assets it had purchased. In the alternative, relying upon the decision in cases such as Gore and Another NNO v Saficon G Industrial (Pty) Ltd 1994 (4) SA 536 (W) at 548--50, the plaintiff claimed an order that the defendant pay the value of the immovable property and assets.

In pleading to this claim, the defendant denied that the insolvent had been a 'trader' as envisaged by s 34 of the Act at the time of the sales or that erf 3475 and butchery equipment had formed part of any business belonging to or H conducted by the insolvent at that stage. While admitting that notice of the sales had not been published under s 34 of the Act, the defendant therefore denied that the insolvent had been obliged to give notice. It pleaded further that it was not in possession of all of the movable assets which it had purchased in terms of the agreement, annexure B, as most of them had been sold and others discarded and that certain of the movables reflected as having been I assets of the butchery sold in terms of annexure B had in fact always formed part of the immovable property sold in terms of annexure A.

And so the matter proceeded to trial. As the defendant is still the registered owner of erf 3475 and apparently now J conducts its own butchery business from the premises, the parties conducted the trial on

Leach J

the understanding that, in the event of it being held that the sale of the immovable property was invalid, I should A grant an order directing the defendant to transfer it back to the plaintiff. However, as the defendant is no longer in possession of most of the movables sold in terms of annexure B, they were agreed that an order should issue for payment of the value of the movables if the sale had been invalid. In this regard agreement was reached on the B precise items in issue (which overcame any potential confusion arising from certain of the movables reflected in annexure B in fact having formed part of the immovable property sold in annexure A) as well as their value, both at the date of purchase by the defendant and at the later date when the defendant disposed of them. However the parties were not ad idem in regard to which of these values should be awarded in the event of the plaintiff being C successful in his claim and called upon me to decide that issue.

The parties were also able to reach agreement in regard to the material facts and circumstances which they recorded in a document headed 'List of matters which are common cause' (to which certain documents, D photographs and plans were attached). After this list was handed in at the hearing, both sides closed their cases without any further evidence being led. The dispute between the parties therefore falls to be decided by reference to these agreed facts, the inferences that can be drawn therefrom and the admissions in the pleadings. E

In the light of this somewhat lengthy introduction, I turn now to consider the facts. As is apparent from the photographs and plan which were attached to the statement of agreed facts, erf 3475 is situated at the corner of two streets which intersect at right angles. Business premises erected on the property front both streets. These business premises are divided into two parts: on viewing the building from the street, there is a general dealer's store F having its own entrance on the extreme left; the remaining portion of the building is a butchery which has its entrance situated on the corner - it is in truth a classical 'corner-shop'. These two shops are independent of each other and do not have an interleading door. To the rear of the business premises is a residential dwelling which, although adjoining the business premises, does not interlead therewith and has its own separate entrance. The area G of the general dealer's store constitutes only some 10% of the total square meterage of the buildings on the erf while the butchery and the residence each constitute some 45% thereof.

For a number of years prior to March 1994, the insolvent personally ran a butchery business on the property H trading under the name of Model Butchery. He allowed his brother, who also worked in the butchery, to occupy the residential portion of the building as a benefit of his employment. As I have said, the insolvent owned the building and the butchery business did not pay rent for the premises. However, the insolvent had no interest in the I general dealer's business, and let the portion of the building in which that enterprise was conducted to a third party.

On 12 or 13 March 1994, a fire caused extensive damage to the butchery, including structural damage to the ceilings and roof-trusses of the building. After the fire, the insolvent negotiated with one Heidtmann, J

Leach J

A who acted on behalf of the defendant, in an effort to sell the property. The ambit of their negotiations widened and eventually culminated in the sale of both the immovable property and the movable assets which are in dispute in this case. These sales were reduced to writing and signed by the parties on 26 April 1994, the written agreements being annexures A and B to which I have already referred.

B On registration of transfer of the immovable property on 9 May 1994, the purchase price realised by the sales was paid and utilised as follows: a bond registered over the immovable property was settled in its entirety by payment of R93 264,71 to the financial institution concerned; R262,20 was used to defray bond cancellation costs; C R24 062,27 was paid to the King William's Town sheriff to pay one of the insolvent's creditors; and R54 063,85 was paid to the insolvent on 11 May 1994.

The defendant then restored the damage caused by the fire and set up a butchery business in the corner shop, but using a different trade name to that which had been used by the insolvent. The insolvent's brother, who had worked D for the insolvent and resided in the dwelling house on the property, was employed to work in the defendant's butchery business and remained resident on the property until December 1994. The general dealership also continued, being conducted by the same third party who had leased that portion of the premises from the insolvent prior to the sale and who paid rent to the defendant thereafter. During January 1995 the defendant disposed of E most...