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[2016] ZAGPJHC 63
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Sheriff, Johannesburg East v Vally; In re: Formeset Printers (Pty) Ltd v Vally (24163/2007) [2016] ZAGPJHC 63 (24 March 2016)
THE
HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, JOHANNESBURG
Case
Number: 24163/2007
DATE:
24 MARCH 2016
THE
SHERIFF, JOHANNESBURG
EAST
............................................................................
Applicant
And
VALLY,
MUHAMMED
.............................................................................................................
Claimant
In
re:
FORMESET
PRINTERS (PTY)
LTD
.....................................................................
Plaintiff/
Claimant
And
VALLY,
REEDWAAN
..............................................................................................................
Defendant
JUDGMENT
MODIBA
J:
[1]
This is an interpleader application in terms of Rule 58 of the
Uniform Rules of Court. The applicant in his capacity as the
Sheriff
of Johannesburg East has issued an interpleader notice in terms of
the aforesaid rule in respect of a writ of execution
issued in this
court against the defendant. The writ placed several assets under
attachment to make good a judgment debt owed by
the defendant to the
plaintiff/claimant (the plaintiff) for an amount of R2, 010,382.06
plus interest and costs.
[2]
Vally Muhamed (the claimant) alleges that one of the assets subject
to the writ was wrongly attached because it does not belong
to the
defendant. He contends that the relevant asset is subject to a pledge
issued by the judgment debtor's son, Zain Muhamed
(Zain) to him.
[3]
The plaintiff denies this claim. It alleges that the claimant is not
the holder of a valid agreement of pledge in that Zain
was not
competent to enter into the said agreement because when the agreement
was entered into, he was not the owner of the pledged
asset. There is
no agreement of pledge between the defendant, who was the owner of
the asset when the agreement was entered into
and the claimant.The
plaintiff also alleges that in the event that I find that a valid
agreement of pledge exists between the claimant
and Zain, the said
pledge does not preclude the sale in execution of the property. It
merely has a bearing on how the execution
proceeds are to be
distributed by the applicant.
BACKGROUND
[4]
The issue to be determined in this application can best be understood
against the background set out below:
[4.1]
The asset subject to the interpleader notice is a 10% member's
interest in Cullinan Falls Trout Farm Registration number
1996/036876/23 (the corporation). According to the plaintiff, the
defendant has at all material times been the registered owner
of the
asset as evidenced by copies of the Companies and Intellectual
Properties Commission (CIPC) company reports dated 8 September
2014,
19 January 2015 and 26 May 2015.
[4.2]
The corporation is a registered owner of Portion 4 (the remaining
extent) of Farm 536 of the Farm Elandshoek, situate in Mpumalanga,
held by title deed number T105527/1996 (the property). The
corporation conducts business as the owner of the property and as a
trout farm.
[4.3]
On 29 July 2009 the plaintiff obtained judgment in this court against
the defendant in an amount of R2, 010,386.06 plus interest
calculated
at 15% from date of judgment to date of payment. As at 31 May 2015,
the amount due by the defendant to the plaintiff
inclusive of
interest was R3, 147,525.31. The defendant has failed to pay this
amount.
[4.4]
On 18 August 2009, the applicant issued a writ of execution against
the defendant. On 8 September 2010, the plaintiff launched
an
application to have the defendant's half share in the property
declared specially executable. This application is still pending.
On
10 October 2014, the applicant served the writ on the defendant. The
return of service for the relevant writ of execution states
that
according to the defendant, the 'shares' were apparently sold and an
amount of approximately R450.00 was paid.
[4.5]
According to the defendant, on 1 February 2012 he transferred his
members' interest in the corporation to his son Zain Vally
(Zain). On
the same date, Zain pledged the member's interest to his uncle, the
claimant. To give effect to the pledge, Zain and
the claimant entered
into a written agreement of pledge as security for payment of a loan
taken for the payment of Zain's school
fees.
[4.6]
Approximately a month after the members' interest in the corporation
was attached, on 12 November 2014, the claimant informed
the
applicant in writing that the members' interest was wrongly attached
as it does not belong to the defendant. He further informed
the
applicant that there was a delay in transferring the members’
interest to Zain apparently due to the death of two members
of the
corporation. As a result the requisite resolution authorizing the
transfer of the members' interest from the defendant to
Zain could
not be obtained. The transfer could only be effected once the winding
up of the estates of the deceased members of the
corporation has been
finalized.
[4.7]
According to emails filed in support of the claimant's particulars of
claim, the defendant only addressed an email to the
secretary of the
corporation and to his co-members on 8 February 2012, informing them
of his decision to transfer his members’
interest in the
corporation to Zain. The email reads as follows:
'I
have decided to transfer my 10% of the farm to my son Zain. I will
however, still responsible for all levies and responsibilities
on the
farm.
Please
let me know if you have any objection to this.'
[4.8]
The transfer of the member’s interest from the defendant to
Zain was only registered in the CIPC on 22 December 2015.
[5]
It is trite that only the owner of a movable asset may pledge it to
another.
[1]
Furthermore, the
constitutive act of delivery is required for a valid pledge to take
place. That being said, Zain may only pledge
the 10% member’s
interest in the corporation if he is the owner thereof and upon
delivery of the pledged asset to the claimant.
LEGAL
ISSUE FOR DETERMINATION
[6]
The legal issue to be determined between the parties is whether
transfer of ownership of the defendant's member's interest in
the
corporation passed to Zain on 1 February 2012 when his father
purportedly donated or sold it to him or when the amended founding
statement bearing the particulars of Zain's membership in the
corporation was registered at the CIPC on 22 December 2015. In the
event that I find that ownership of the members' interest was only
transferred to Zain upon registration of the amended founders’
statement at the CIPC, I ought to also determine whether the
purported transfer is valid given that when it took place, the
members'
interest had been attached by the applicant
[7]
It is the plaintiff's contention that ownership of the defendant's
members' interest in the corporation was only transferred
to Zain
upon registration of the amended founding statement at the CIPC.
Therefore Zain could not validly pledge the members’
interest
to the claimant. The claimant denies this. He contends that despite
the fact that the founding statement reflecting a
change in ownership
of the member’s interest from the defendant to Zain was only
registered at the CIPC on 22 December 2015,
ownership of this asset
was transferred to Zain when the defendant donated it to him on 1
February 2012.Therefore it was wrongly
attached.
[8]
The plaintiff has premises it's case on the definition of a
'member'
and that of a
'founding
statement'
set out in section 1 of the Close Corporation Act 69 of 1984. The
relevant definitions intimate that registration of a founding
statement designating a person qualified in terms of section 29 of
the Close Corporation Act as a member of a corporation is necessary
to transfer ownership of a member’s interest in a corporation.
The plaintiff enjoins the court to accept an interpretation
of these
definitions in Close Corporations Act (Volume 3 Service Issue 29 -
August 2015) where Henochsberg states that
de
facto
membership is not membership in terms of the Close Corporation Act
unless the context otherwise dictates. The registration of a
founding
statement is central to the registration of a close corporation.
[2]
The member of the corporation is either a registered member or a
legal representative of the corporation.
[3]
Prior to 10 October 2014, Zain was neither. Unless there is
compliance with these provisions, any intended change to the
membership
of the close corporation is ineffectual. Furthermore
section 15(2) states that if there is any change to a founding
statement,
such change shall only take effect when such statement has
been so registered in the relevant registers. See
Geany
v Portion 117 Kalkheuwel Properties CC and Others
1998
(1) SA 622
(T) where the Kirk-Cohen J found that:
'...
if a member resigns, such resignation will only takes place when an
amended founding statement is registered. This provision
is repeated
boldly on the relevant CK2 form.'
[4]
[9]
Counsel for the claimant referred me to several authorities in an
attempt to sustain the claimant’s contentions. I do
not find
the cases applicable to this case and for that reason do not deem it
necessary to deal with them in this judgement.
[10]
Section 29(3) (a) states unequivocally that membership of any person
who qualifies for membership of a close corporation commences
on the
date of registration of a founding statement of the corporation
containing the particulars required in terms of section
12 in regard
to such person and his members' interest.
[11]
In light of the foregoing, plaintiff's intention to transfer his
member's interest to Zain on 1 February 2012 is ineffective.
Therefore, Zain was incompetent to pledge the member's interest to
the claimant when he purported to do so on 1 February 2012.
When the
applicant attached the members' interest on 10 October 2014 to
satisfy the judgment debt, the defendant was the owner
of this asset.
Therefore the attachment was validly made. Any purported transfer of
this asset subsequent to it being attached
is of no force or effect.
[12]
I am concerned that when the sheriff served the writ of execution on
the defendant on 10 October 2014, the defendant allegedly
informed
the sheriff that the 'shares' were sold and that an amount of
approximately R450.00 was paid. This is reflected on the
sheriff’s
return of service. Yet in his affidavit in these proceedings,
confirmed in confirmatory affidavits by Zain and
the defendant, the
claimant alleges that this asset was ‘given’ to Zain by
the defendant. He makes no mention of a
sale. The emails exchanged
between the defendant, the secretary of the corporation and other
members of the corporation also refer
to a donation rather than a
sale. There can never be a sale and donation of the same asset by the
same seller and donor to the
same purchaser and recipient. The
defendant, the claimant and Zain seem to be misleading the court
regarding the basis for the
alleged transfer of the shares to the
claimant. In the circumstances, the purported invalid registration of
the member’s
interest in Zain’s name at the CIPC on 22
December 2015 warrants an investigation by the relevant authorities
because it
was effected in contravention of
section 46
(a), (b) and
(c) of the
Superior Courts Act 10 of 2013
which sets out numerous
offences relating to execution. I strongly frown upon the conduct of
the claimant in this regard. He is
a practicing attorney and an
officer of this court. He has the professional duty not to be party
to any act of dishonesty and not
to mislead this court.
[13]
In the circumstances, it is appropriate that I refer the claimant,
the defendant and Zain to the South African Police Service
for
investigation. It is also appropriate that I refer the claimant to
the Law Society of the Northern Provinces for investigation.
ORDER
[14]
In the premises, I make the following order:
1.
The interpleader notice is dismissed with
costs, including the charges and costs of the applicant.
2.
The registration of 10% member's interest
in Cullinan Falls Trout Farm Registration number 1996/036876/23 (the
corporation) from
Reedwaan Vally to Zain Vally is declared invalid
and hereby set aside.
3.
The 10% member's interest in Cullinan Falls
Trout Farm Registration number 1996/036876/23 (the corporation) is
declared to be validly
attached to satisfy the judgment debt owed by
Reedwaan Vally to Formeset Printers (Pty) Ltd.
4.
The purported transfer of the member’s
interest from Reedwaan Vally to Zain Vally which was registered at
the CIPC on 22 December
2015 in contravention of
section 46
(a) (b)
and (c) of the
Superior Courts Act is
referred to the South African
Police Services for investigation.
5.
The participation of Muhamed Vally in the
transfer of the member’s interest from Reedwaan Vally to Zain
Vally as well as his
conduct in these proceedings is also referred to
the South African Police Services and to the Law Society of the
Northern Provinces
for investigation.
6.
The Registrar is ordered to send a copy of
this judgment to:
(a)
The Station Commander
South
African Police Service
Johannesburg
Central Police Station
1
Commissioner Street, Johannesburg
(b)
The Chairperson of the Law Society of the
Northern Provinces
Procforum
Building
123 Paul Kruger
Street
Pretoria
0002
MODIBA
J
Judge
of the High Court of South Africa
Gauteng Local
Division
APPEARENCES
PLAINTIFF’S
/CLAIMANT’S
Counsel:
Advocate Amelia Rawhani
Instructed
by: Martins Attorneys
DEFENDANT’S
Counsel:
Yakoob Alli
Instructed
by: MVIP Attorneys
Date
of hearing: 29 February 2016
Date
of Judgment: 24 March 2016
[1]
LAWSA
Vol 17(2) - Grotius Inleidinge 2 48 1;
Smith
v Farrelly’s Trustee
1904 TS 949
955;
Oertel
v Brink
1972 3 All SA 469
(W);
1972 3 SA 669
(W) 674-675;
Vasco
Dry Cleaners V Twycross
1979 1 All SA 321
(A);
1979 1 SA 603
(A) 611E.
[2]
According
to Henochsberg a Close Corporation is formed when the prescribed
document (form CK1), known as the founding statement,
duly completed
is lodged with the Registrar of the CIPC (together with proof of
payment of the prescribed fee) and registered
in his registers. See
Vol 1 (Chapter 2) on his discussion on Close Corporations.
[3]
Section
29(2)
(c).
[4]
At
625A.
See
also
Johnson
v Incorporated General Insurances Ltd
1983 (1) SA 318
(AD) at 330-331.