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[2016] ZASCA 47
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Chiliza v Govender and Another (20837/14) [2016] ZASCA 47; 2016 (4) SA 397 (SCA) (31 March 2016)
THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Reportable
Case
No: 20837/14
In
the matter between:
NOMVULA EFFIE
CHILIZA
APPELLANT
and
ASHENDRAN
GOVENDER
FIRST RESPONDENT
INTEGER MORTGAGE SPV (PTY)
LTD
SECOND
RESPONDENT
Neutral
Citation:
Chiliza v Govender
(20837/14)
[2016] ZASCA 47
(31 March 2016)
Coram:
Tshiqi, Pillay, Swain and Dambuza JJA
and Tsoka AJA
Heard:
4 March 2016
Delivered:
31
March 2016
Summary:
Interpretation –
sections 9(4A)
and
11
(2A)
(c)
of
the
Insolvency Act 24 of 1936
– couched in peremptory
terms – failure to furnish petition and – failure to
serve provisional order on
the South African Revenue Service
constitutes non-compliance – petition furnished but provisional
order not served on SARS
– final order of sequestration set
aside.
ORDER
On
appeal from:
KwaZulu-Natal Division of
the High Court, Pietermaritzburg (Kruger, Seegobin and Mbatha JJ
sitting as a court of appeal):
1.
The appeal is upheld
with no order as to costs.
2.
The order of the full
court is set aside and replaced with the following:
‘
(a)
The appeal is upheld with no order as to
costs.
(b)
The order of the KwaZulu-Natal Local Division, Durban (Vahed J) is
set aside and replaced
with the following:
“
(i)
The final order of sequestration granted on 9 July
2012 is set aside.
(ii) The estate of
the respondent, Nomvula Effie Chiliza (ID 760319 0263 081) (date of
birth 19 March 1976) is
placed under provisional sequestration in the
hands of the Master of the High Court.
(iii) A rule nisi is
issued calling upon the respondent and all interested persons to show
cause, if any, to this Honourable
Court on 4 May 2016 at 9h30, or so
soon thereafter as the matter may be heard, why the estate of the
applicant should not be finally
sequestrated.”’
JUDGMENT
Tshiqi
JA (Pillay, Swain and Dambuza JJA and Tsoka AJA concurring)
[1]
The issue in this
appeal is whether the failure to serve a provisional sequestration
order, on the South African Revenue Service
(SARS) in terms of s
11(2A)
(c)
of
the Insolvency Act 24 of 1936 (the Act), is an absolute bar to the
grant of a final order of sequestration.
[2]
On
17 February 2012, the first respondent, Mr Ashendran Govender, sought
and obtained a provisional order of sequestration on an
urgent basis
in the KwaZulu-Natal Local Division, Durban (the high court) against
the appellant, Ms Nomvula Chiliza, returnable
on 15 March 2012. A
copy of the petition was served on SARS on 16 February 2012 in
compliance with the provisions of s 9(4A) of
the Act.
[1]
It was also served on the second respondent, Integer Mortgage SPV
(Pty) Ltd, on 17 February 2012, shortly before the application
was
heard in court. On 15 March, the second respondent gave notice
of its intention to intervene as a creditor in the matter
and the
sequestration application was accordingly adjourned for that purpose.
The second respondent reconsidered its position and
on 9 July 2012 a
final order of sequestration was granted.
[3]
On 19 July 2012 the
appellant launched an application for the rescission of the final
order on the basis that the provisional order
of sequestration was
not served on SARS as contemplated in terms of s 11(2A)
(c)
of the Act.
[4]
Section 11(2A) of the
Act provides:
‘
A
copy of the rule nisi
must
be served
on
(a)
Any trade
union referred to in subsection (4)
(b)
The debtor’s
employees by affixing a copy of the petition to any notice board to
which the employees have access inside the
debtor’s premises,
or if there is no access to the premises by the employees, by
affixing a copy to the front gate, where
applicable, failing which to
the front door of the premises from which the debtor conducted any
business at the time of the presentation
of the petition; and
(c)
The South
African Revenue Service.’ (My emphasis.)
[5]
It is common cause that
the provisional order was not served on SARS. The issue before the
high court was whether the final order
stood to be rescinded for that
reason. The high court (per Vahed J), in a judgment reported
sub
nom
:
Chiliza
v Govender & another
2013 (4) SA 600
(KZD), compared the provisions of s 11(2A) with those
of ss 9(4A) and 12 and reasoned (para 20):
‘
There
is a striking difference between s 9(4A) and s 11(2A) of the Act. It
is this: when a court considers a petition, and before
granting a
provisional order of sequestration, there must be placed before it an
affidavit which sets out the manner in which the
provisions of the
section have been complied with (s 9(4A)
(b)
).
Section 11(2A) of the Act does not contain a similar provision.’
And it went on to observe that (para
23):
‘
section
12 of the Act does not oblige a court to take the non-service of the
provisional order into account when exercising its
discretion whether
to grant a final order.’
It
then concluded that the failure to serve the provisional order upon
SARS was not fatal and did not preclude the granting of a
final order
sequestrating the estate of the appellant.
[6]
An appeal to the full
court of the KwaZulu-Natal Division, Pietermaritzburg was dismissed
and that court endorsed the reasoning
of Vahed J, and said (para 13):
‘
.
. . failure to serve the provisional order on SARS, in terms of s
11(2A)
(c)
,
would not preclude the grant of a final order of sequestration
order.’
And it went on to say the following in
para 14:
‘
This
view is reinforced or supported by the provisions of s 9(4A)
(b)
which
requires an affidavit to be filed, before or during the hearing,
setting out the manner in which service on the trade unions,
employees and the SARS was effected. Absent this affidavit, a court,
in my opinion, is precluded from granting the provisional
order of
sequestration. The Legislature however did not deem it necessary to
amend s 11 in a similar fashion and the requirements
for the grant of
a final order of sequestration are set out in s 12 and remain
unchanged.’
The
court concluded that failure to serve the provisional order on SARS,
in terms of s 11(2A)
(c)
would
not preclude the grant of a final sequestration order.
[7]
The present appeal is
with the leave of this court. The first respondent is not a party to
the appeal and the second respondent
has filed a notice to abide by
the decision of the court.
[8]
The provisions of s
11(2A) are couched in peremptory terms. In
Natal
Joint Municipal Pension Fund v Endumeni Municipality
2012(4) SA 582 SCA para 18 this court stated:
‘
Whatever
the nature of the document, consideration must be given to the
language used in light of the ordinary rules of grammar
and syntax;
the context in which the provision appears; the apparent purpose to
which it is directed and the material known to
those responsible for
its production. Where more than one meaning is possible each
possibility must be weighed in the light of
all those factors. The
process is objective, not subjective. A sensible meaning is to be
preferred to one that that leads to insensible
or unbusiness like
results or undermines the apparent purpose of the document…The
inevitable point of departure is the language
of the provision
itself, read in context and having regard to the purpose of the
provision and the background to the preparation
and production of the
document.’
[2]
(Footnote omitted.)
[9]
The
reasoning adopted by Vahed J and subsequently endorsed by the full
court disregards the clear language used in the statute.
Whilst it is
correct that ss 9(4A)
(b)
and
11(2A) deal with the manner in which the parties listed in those
sections should be notified of the impending sequestration
proceedings, the requirement in s 9(4A)
(b)
that
an affidavit should be filed, does not change the peremptory nature
of the language used. As the Act states, its purpose is
to inform the
court about the manner in which the petition was ‘furnished’
to the listed parties. However, whilst s
9(4)
(a)
requires
the petitioner to ‘furnish’ a copy of the petition, s
11(2A) requires a copy of the rule nisi to be ‘served’
on
the listed parties. In
Stratford
& others v Investec Bank Ltd & others
,
[3]
the Constitutional Court said of the different terminology employed
in those provisions (para 40):
‘
The
fact that “furnish” is used in s 9(4A) and the word
“serve” is used in
s 11(2A)
of the
Insolvency Act
indicates
that the legislation envisaged a lower threshold for
notifying the employees than service in respect of
s 11(2A).
I am of
the view that “furnish” requires that petitions “must
be made available in a manner reasonably likely
to make them
accessible to the employees”.’ (Footnotes omitted.)
[10]
The
fact that a copy of the petition only has to be ‘furnished’
to SARS has no bearing on the peremptory nature of this
requirement.
In
Gungadoo
& another v Hannover Reinsurance Group Africa (Pty) Ltd &
another
[2012] ZASCA 83
2012 (6) SA 537
(SCA) this court left open the
question whether
s 9(4A)
was peremptory. However in
EB
Steam Company (Pty) Ltd v Eskom Holdings SOC Ltd
[2013]
ZASCA 167
;
2014 (1) All SA 294
(SCA) this court in dealing with the
provisions of
s 346(4A)
of the old Companies Act (which are almost
identical to s 9(4A) of the Act) held that compliance with the
section was peremptory.
[4]
Similarly in the present case, the requirement that the petition be
furnished to SARS is peremptory.
[11]
In
view of the fact that the word “furnish” is expansive and
encompasses several forms of notification which may not
entail
personal service, it seems to me that the Act prescribed the filing
of an affidavit as the most effective way to satisfy
a court that the
petition has been ‘made available in a manner reasonably likely
to make it accessible’ to the listed
parties. It is not
surprising that s 11(2A) does not contain a similar requirement
because the term “serve” usually
denotes personal service
or “legally delivered, i.e. delivered in accordance with the
law so as to notify the person on whom
it is served of its
contents”
[5]
or “bestel;
oorhanding”
[6]
to the
party itself or its representative and is usually easy to prove
through a return of service, a stamp or a signature of the
recipient.
It is only in rare circumstances, usually when proof of service is
not apparent on the face of the document that a court
would require
an affidavit to prove service. The import of the requirement of an
affidavit in s 9(4A) therefore is to provide conclusive
proof of
compliance with the provisions of the Act and the fact that s 11(2A)
does not require an affidavit to be filed, whilst
s 9(4A)
(b)
does,
has no bearing on the peremptory nature of the two provisions.
[12]
The
court also compared s 11(2A) with s 12. Section 12 deals with factors
to be taken into account before the court grants a final
order of
sequestration and thus deals with the substance of the application
and not the procedural requirements. However, it
does not set
out an exhaustive list of all the relevant factors and the fact
that it does not explicitly state that the court
should take into
account the non-service of a provisional order of sequestration when
it exercises its discretion whether to grant
a final order does not
alter the peremptory nature of s 11(2A). The only relevant
connection between s 11(2A) and its interpretation
to s 12 is that s
12 requires the court to consider as one of the factors, whether it
is to the advantage of the creditors that
a final order of
sequestration should be granted. Whether a provisional order
was served on SARS, which is a preferential
creditor in terms of the
Act,
[7]
must be one of those factors. This must be so because any tax for
which the insolvent was liable under any Act of Parliament or
Ordinance of a Provincial Council in respect of any period prior to
the date of sequestration of the estate is due. And if a provisional
order of an impending sequestration is not served on SARS, there is a
risk that any amounts due to the public purse would remain
uncollected.
[13]
For all those reasons the
appeal must succeed. I therefore make the following order
:
1. The appeal is upheld with no
order as to costs.
2. The order of the full court
is set aside and replaced with the following:
‘
(a)
The appeal is upheld with no order as to
costs.
(b)
The order of the KwaZulu-Natal Local Division, Durban (Vahed J) is
set aside and replaced
with the following:
“
(i)
The final order of sequestration granted on 9 July
2012 is set aside.
(ii) The estate of
the respondent, Nomvula Effie Chiliza (ID 760319 0263 081) (date of
birth 19 March 1976) is
placed under provisional sequestration in the
hands of the Master of the High Court.
(iii)
A rule nisi is issued calling upon the respondent and
all interested persons to show cause, if any, to this Honourable
Court on 4 May 2016 at 9h30, or so soon thereafter as the matter may
be heard, why the estate of the applicant should not be finally
sequestrated.”’
___________________
ZLL Tshiqi
Judge
of Appeal
APPEARANCES
For
Appellant:
V Sitaram
Instructed
by:
K. Durai & Associates, Durban
Honey Attorneys,
Bloemfontein
For First
Respondent:
No appearance
Instructed
by:
CKMG
Attorneys, Verulam
[1]
Section
9(4A) of the Act provides:
‘
(a)
When a petition is presented to the
court, the petitioner must furnish a copy of the petition
(i) to every registered trade union
that, as far as the petitioner can reasonably ascertain, represents
any of the debtor's employees;
and
(ii) to the employees
themselves-
(aa)
by affixing a copy of the petition
to any notice board to which the petitioner and the employees have
access inside the debtor's
premises; or
(bb)
if there is no access to the
premises by the petitioner and the employees, by affixing a copy of
the petition to the front gate
of the premises, where applicable,
failing which to the front door of the premises from which the
debtor conducted any business
at the time of the presentation of the
petition;
(iii)… to the South African
Revenue Services; and
(iv) to the debtor,
unless the court, at its discretion, dispenses with the furnishing
of a copy where the court is satisfied
that it would be in the
interest of the debtor or of the creditors to dispense with it.
(b)
The petitioner must, before or during the
hearing, file an affidavit by the person who furnished a copy of the
petition which
sets out the manner in which paragraph
(a)
was complied with.’
[2]
Natal
Joint Municipal Pension Fund v Endumeni Municipality
[2012] ZASCA 13
;
2012 (4) SA 593
(SCA) para 18.
[3]
Stratford
& others v Investec Bank Ltd & others
[2014] ZACC 38
;
2015 (3) SA 1
(CC). See also
EB
Steam Co (Pty) Ltd v Eskom Holdings SOC Ltd
[2013] ZASCA 167; 2015 (2) SA 526 (SCA).
[4]
EB Steam
dealt with the furnishing of the application to employees and held
that although compliance with the section was peremptory,
the method
in which a creditor did so, was directory.
[5]
S v
Watson
1969 (3) SA 405
(A) at 410B
[6]
Botha NO
v Botha
1965 (3) SA 128
(E)
at 130F;
Odendaalsrus
Munisipaliteit v Odendaalsrus Gold, General Investment &
Extension Ltd
1958 (3) SA 111
(O) at 114E;
Mouritzen
v Greystones Enterprises (Pty) Ltd
2012 (5) SA 74
(KZD) AT 86C;
[7]
Section 101
of the Act.