Paterson NO v Trust Bank of Africa Ltd

• Jurisdiction: South Africa
• Judge: Jansen JA, Corbett JA, Diemont JA, Galgut AJA and Botha AJA
• Judgment Date: 25 September 1979
• Citation: 1979 (4) SA 992 (A)
• Hearing Date: 11 September 1979
• Court: Appellate Division

Botha AJA:

The appellant is the trustee in the insolvent estate of Llewellyn Strydom. In that capacity the appellant brought an action against the respondent in the South-Eastern Cape Local Division, claiming F an order setting aside the payment of a sum of R13 641,99 to the respondent on the ground that such payment was a disposition of Strydom's property which constituted a voidable preference in terms of s 29 (1) of the Insolvency Act 24 of 1936. The trial Judge dismissed the appellant's G claim, with costs. Against that order the appellant now appeals.

The payment in question arose out of a contract entered into between Strydom and one Crouse on 16 January 1976. Strydom was at the time a practising attorney, and Crouse was employed by him as a professional assistant. The contract was a sale by Strydom to Crouse of the former's practice as an attorney. In terms of the contract Crouse bought the office H furniture and equipment, stationery and library for a sum of R8 500, the book debts due to the firm for an amount to be fixed by the auditors as at 31 January 1976 and the goodwill and undebited fees as at the same date, for a sum of R8 500. Crouse was to take over the firm on 1 February 1976. The total purchase consideration was expressed to be payable by Crouse by means of a payment of R15 000 in cash on 1 February 1976, for the credit of Strydom's business account with the respondent, and the balance in monthly instalments of R500 as from 28 February 1976 for the credit of Strydom's private banking account.

Botha AJA

Pursuant to this contract Crouse on 31 January 1976 caused a cheque for R15 000 to be paid into Strydom's business account with the respondent. On A that date, immediately prior to the payment, the account was overdrawn to the extent of R13 641,99. The payment accordingly had the effect of extinguishing Strydom's indebtedness to the respondent in respect of the overdrawn account, in an amount of R13 641,99. It is this amount which is in issue in these proceedings.

Strydom's estate was provisionally sequestrated on 10 March 1976 B and finally sequestrated on 30 March 1976. The appellant's first distribution account in the estate, which was drawn up a little more than a year after the sequestration, reflected claims proved in the estate in a total sum of approximately R288 000, and money available for distribution in an amount of approximately R39 000, leaving a deficiency of roughly R24 C 9000. The appellant anticipated that a further sum of about R30 000 would become available for distribution amongst creditors. It is clear, therefore, that Strydom was hopelessly insolvent. The appellant in his evidence stated that his account reflected Strydom's position as at the date of his sequestration, and he said further that there would not have D been any material difference in his financial poaition as at 31 January 1976 when the disputed payment was made. This evidence was not challenged on behalf of the respondent. It can safely be accepted that Strydom's position was also substantially the same on 16 January 1976 when he concluded the contract with Crouse.

E On the basis of the facts summarised thus far, it was common cause, both in the Court a quo and in this Court, that the payment of R15000 into Strydom's business account with the respondent on 31 January 1976 was a disposition of his property within the ambit of s 29 (1) of the Act, read with the definition of "disposition" in s 2; that the diskposition was made within six ths before the sequestration of Strydom's estate; that F immediateely after the disposition Strydom's liabilities exceeded the value of his assets; and that the disposition had the effect of prefering the respondent as a creditor of Strydom above his other creditors, to the extent of the sum of R13 641,99. Accordingly, the appellant has proved those requirements for the application of s 29 (1) in respect of which the G onus of proof rested upon him. The respondent sought to avoid the application of the section by relying on those provisions of it in respect of which the onus of proof rested upon the respondent, viz that the disposition was made in the ordinary course of business and that it was not intended thereby to prefer one creditor above another. These two allegations had been made in the respondent's plea and the evidence led at the trial was directed mainly at the issues raised thereby.

H I shall deal first with the respondent's contention that the disposition was made in the ordinary course of business. In Hendriks NO v Swanepoel 1962 (4) SA 338 (A) at 345 VAN WINSEN JA delivering the judgment of the majority of the Court, said the following:

"Die Hof benader die vraag of 'n transaksie in die gewone loop van sake geskied het, objektief wanneer hy hom afvra of, in ag genome die voorwaardes van die ooreenkoms en die omstandighede waaronder dit aangegaan is, die bedoelde ooreenkoms een is wat normaalweg tussen solvente besigheidsmense aangegaan sou word. (Watter omstandighede regtens in ag geneem kan word, hang van die besondere geval af. Byvoorbeeld die omstandigheid dat die kontrakterende

Botha AJA

insolvent se laste sy bates op die oomblik van die aangaan van die ooreenkoms oorskry, is nie een wat die Hof in ag sal neem nie (sien oa Fourie's Trustee v Van Rhyn 1922 OPD 1 en R v Myers 1931 TPD 304), en daar mag ander ook wees)."

A In the course of his argument, counsel for the appellant submitted that it would be artificial to exclude from a consideration of the circumstances surrounding the disposition in the present case the fact that Strydom was insolvent at the time, in view of the finding of the trial Judge that Strydom knew then that sequestration was inevitable and in view of B counsel's further argument that the respondent must also at the time have been aware at least of a distinct possibility that Strydom was insolvent. However, counsel did not develop his submission and we were not pertinently invited to consider whether the statement in Hendriks' case supra required to be qualified or re-examined. Since it is not necessary to do so in order to arrive at a decision in this appeal. I propose to say C no more about counsel's submission, and to consider the circumstances surrounding the disposition without having regard to Strydom's insolvency at the time, or to his knowledge or the respondent's alleged knowledge of that fact. On the other hand, neither counsel suggested that there was any reason - and Ican perceive none - why any of the other surrounding D circumstances, ie apart from those bearing on Strydom's insolvency, should be excluded from consideration in determining whether the disposition was made in the ordinary course of business. Upon this footing I proceed to consider those circumstances.

Both Crouse and Strydom gave evidence; the former was called as a witness for the...