Swadif (Pty) Ltd v Dyke, NO

• Jurisdiction: South Africa
• Judge: Wessels JA, Muller JA, Miller JA, Joubert JA and Trengove AJA
• Judgment Date: 22 November 1977
• Citation: 1978 (1) SA 928 (A)
• Hearing Date: 15 September 1977
• Court: Appellate Division

Trengove, A.J.A.:

This is an appeal, in terms of sec. 20 (1) (b) of the H Supreme Court Act, 59 of 1959, with the leave of the Court a quo in terms of sec. 20 (2) (b) of the said Act, against an order of STRYDOM, J., in the South West Africa Division dismissing certain exceptions to a plea. I shall for convenience refer to the appellant, Swadif (Pty.) Ltd., as the defendant and to the respondent, Michael John Dyke, N.O., as the plaintiff.

The plaintiff instituted an action against the defendant in September 1975 and his particulars of claim, as subsequently amended, read as follows:

Trengove AJA

1.

Plaintiff is Michael John Dyke, an adult male, care of Syfrets Trust Co. Ltd., 24 Wale Street, Cape Town, in the Cape, and he sues herein in his capacity as the duly appointed liquidator of Coronation Investments (Pty.) Ltd. ("the Company").

2.

A Defendant is Swadif (Pty.) Ltd., a company having a share capital duly incorporated with limited liability and having its registered office at c/o Jurie J. van Zyl (Estate Agents) (Pty.) Ltd., United Building, Göring Street, Windhoek.

3.1

B The company was placed under a provisional winding-up order on 4 June 1973, and was placed under a final winding-up order on 13 July 1973.

3.2

The company is being wound up and is unable to pay all its debts.

4.

On 13 May 1971, and more than two years prior to the presentation of C the application for the winding-up order aforesaid, the company caused a second mortgage bond to be registered over its immovable property in favour of defendant in respect of an amount of R40 000, for which no value was given to or was received by the company.

5.

The registration of the said mortgage bond was a disposition without value in terms of sec. 26 of Act 34 of 1936 as read with sec. 181 of Act 46 of 1926.

6.

D Immediately after the said mortgage bond was registered the liabilities of the company exceeded its assets.

7.1

On 30 January 1973 the defendant was granted judgment in this honourable Court for provisional sentence with costs against the E company in the sum of R40 000 under and by virtue of the said mortgage bond, with interest thereon at the rate of 12 percent per annum from 13 May 1971 to date of payment, with costs, and the property specially hypothecated was declared executable.

7.2

After provisional sentence had been granted as aforesaid, the company did not give notice of its intention to go into the principal case, F and accordingly, in terms of Rule 8 (11) of the Rules of this honourable Court, and in default of such notice, the said judgment became a final judgment on or about 30 March.

8.

By reason of the premises, plaintiff is entitled to have the aforesaid judgment rescinded.

Wherefore plaintiff claims:

(a)

G an order rescinding the judgment granted by the honourable Court against the company in favour of defendant on 30 January 1973, which became final on or about 30 March 1973;

(b)

an order setting aside the said disposition as one without value under sec. 26 of Act 24 of 1936 as read with sec. 181 of Act 46 of 1926.

(c) (i)

H an order directing defendant to cancel the said bond within a time to be fixed by this honourable Court; and failing compliance therewith -

(ii)

an order directing and authorising the Sheriff or his lawful deputy to sign all necessary documents and to take all necessary steps to cause the said bond to be cancelled at defendant's expense;

(d)

alternative relief;

Trengove AJA

(e)

costs of suit."

The defendant excepted to the plaintiff's particulars of claim on the ground that the said particulars

"lack averments necessary to sustain the plaintiff's claims, A alternatively, that the said particulars read with the plaintiff's reply to the defendant's notice in terms of Rule 23 (1), are vague and embarrassing, more particularly in that

(a)

the allegations relied upon by the plaintiff do not support the conclusion in para. 8 of the said particulars of the relief sought B in claim (a) thereof;

(b)

on the allegations relied upon by the plaintiff, the defendant has a final judgment against the plaintiff on the second mortgage bond which the plaintiff seeks to have set aside, which final judgment replaced and novated the rights and liabilities of the parties under the said bond which cannot therefore now be set aside or C cancelled as claimed."

Two issues arise for decision. The first is whether the liquidator of a company is entitled to obtain rescission of a judgment against the company on a bond passed by the company over its immovable property, more than two years prior to liquidation, on the ground that the bond was a disposition D without value in terms of sec. 26 of the Insolvency Act, 24 of 1936 (hereinafter referred to as "the Act"), read with sec. 181 of the Companies Act, 46 of 1926.

Sec. 26 of the Act, insofar as it is material to the present proceedings, reads as follows:

"(1)

Every disposition of property not made for value may be set aside E by the Court if such disposition was made by an insolvent:

(a)

more than two years before the sequestration of his estate, and it is proved that, immediately after the disposition was made, the liabilities of the insolvent exceeded his assets;............

Provided that if it is proved that the liabilities of the insolvent at any time after the making of the disposition F exceeded his assets by less than the value of the property disposed of, it may be set aside only to the extent of that excess."

"Disposition" is defined in sec. 2 of the Act to mean

"any transfer or abandonment of rights to property and includes a sale, lease, mortgage, pledge, delivery, payment, release, compromise, donation or any contract therefor, but does not include a disposition in compliance G with an order of the Court".

According to the particulars of claim, the plaintiff is seeking to have the judgment set aside solely on the ground that the registration of the mortgage bond in question constituted a disposition without value in terms of sec. 26 of the Act. Counsel were agreed that sec. 26 of itself did not empower the Court to rescind the judgment and that there was no other H provision in the Act enabling the Court to do so in these circumstances.

The main submission on behalf of the plaintiff was that, on the allegations set forth in the particulars of claim, he was entitled to have the judgment set aside at common law. The starting point for this contention was the well-known statement by DE VILLIERS, C.J., in Stewart's Assignees v Wall's Trustee and Others, 3 S.C. 243, that a judgment

"may be set aside on any of the grounds on which restitutio in integrum would be granted by our law, such as fraud or some other just cause".

This statement of the law was subsequently referred to with qualified

Trengove AJA

approval by DE VILLIERS, J.P., in Childerley Estate Stores v Standard Bank of SA Ltd., 1924 OPD 163, the locus classicus on the subject of the Court's powers to rescind judgments at common law. There is, of A course, ample authority for the proposition that a trustee, and for that matter, a liquidator, is not deprived by the Act of any rights which he may have at common law, provided they are not inconsistent with the Act (Mars, on Insolvency, 6th ed., p. 232; Fenhalls v Ebrahim and Others, 1956 (4) SA 723 (D) at p. 725.)

B Mr. Berman, for the plaintiff, advanced a number of arguments in support of his main submission but, as I shall presently indicate, they founder because they raise issues which are not covered by the particulars of claim. The whole frame of the particulars of claim indicates that the plaintiff is relying on sec. 26 of the Act, and nothing more. And, for the C purposes of deciding the issues raised on exception, the Court must, of course, deal with the plaintiff's case as it is presented by the particulars of claim. The importance of stating a plaintiff's cause of action clearly and unequivocally in a case such as this was emphasized by INNES, C.J., in the following passage in his judgment in Desai's Trustee v Hack, 1910 T.P.D. 499 at p. 511:

D "It has been the practice of the Court to insist on a precise statement of the ground of action in cases connected with insolvent estates; and if the plaintiff in such a suit desires to rely not merely upon the provisions of the statute, but upon the common law, it is essential that his declaration should contain a count to that effect. The mere fact that fraud and collusion are alleged in connection with the statutory count is not sufficient to lay the foundation for a claim under the common law. The basis of such a claim (as I have pointed out) needs careful consideration, and the defendant is entitled to know what doctrine of the common law he E has infringed, and exactly what case he has to meet".

I proceed to examine the contentions, advanced in support of Mr. Berman's main submission, in the light of these remarks.

Mr. Berman contended, in the first instance, that the plaintiff was F entitled to have the judgment set aside under the actio Pauliana because a disposition under sec. 26 was, in effect, an alienation in fraudem creditorum. We were not referred to any authorities, and I am not aware of any, which support the proposition that a disposition under sec. 26 must necessarily be equated to an alienation in fraud of creditors. However, it G is not necessary to pursue this contention any further since it is self-evident that the plaintiff does not purport to claim rescission of the judgment under the actio Pauliana or on the basis of an alienation in fraudem creditorum.

It was also contended that, in seeking to have the disposition set aside under sec. 26 of the Act, the plaintiff was in effect claiming restitutio in integrum and that this constituted a "just cause"...