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[2012] ZASCA 91
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South Africa Congo Oil Company (Pty) Ltd v Identiguard International (Pty) Ltd (710/11) [2012] ZASCA 91; 2012 (5) SA 125 (SCA) (31 May 2012)
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SUPREME
COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case No: 710/11
Reportable
In the matter
between:
SOUTH AFRICAN
CONGO OIL COMPANY
(PTY) LTD
….......................................................................................
Appellant
and
IDENTIGUARD
INTERNATIONAL (PTY) LTD
…...................
Respondent
Neutral citation:
South Africa Congo Oil Company (Pty) Ltd v Identiguard
International (Pty) Ltd
(710/11)
[2012] ZASCA 91
(31 May 2012)
Coram:
MPATI
P, CACHALIA, LEACH JJA and KROON AND BORUCHOWITZ AJJA
Heard:
15 MAY
2012
Delivered:
31
MAY 2012
Summary:
Execution – garnishee proceedings – rule of court
45(12)(
a
) – whether attachment of debt in terms of rule
45(8) necessary to render garnishee proceedings effective.
___________________________________________________________
ORDER
___________________________________________________________
On appeal from:
South Gauteng High Court, Johannesburg (Victor J sitting as a
court of first instance):
The following order
is made:
1 The appeal
succeeds with costs including the costs of two counsel;
2 The order of the
court below is set aside and the following order substituted for it:
‘
The
application is dismissed with costs, including the costs of two
counsel.’
___________________________________________________________
JUDGMENT
___________________________________________________________
BORUCHOWITZ AJA
(MPATI P, CACHALIA, LEACH JJA and KROON AJA concurring):
[1] This appeal is
concerned with garnishee proceedings under the Uniform Rules of Court
for the attachment of a debt owed to a
judgment debtor by a third
person (Rule 45(12)).
[2] On 28 February
2003, judgment by default was entered by the South Gauteng High Court
against the Government of the Democratic
Republic of the Congo (‘the
DRC’) in favour of the respondent for payment of US$576 000
and US$1 395 000,
or the equivalent of these sums in South
African Rand, together with interest thereon and costs of suit.
Pursuant to a writ of
execution issued on the strength of the
judgment, the respondent sold in execution an aircraft owned by the
DRC. The sale yielded
an amount of R1 766 007.72. The
respondent has only obtained partial satisfaction of the judgment and
the balance of
the judgment debt remains unpaid.
[3] The respondent
invoked garnishee proceedings in terms of rule 45(12) against the
appellant as a means of executing on the judgment
against the DRC. It
is common cause that a sum of US$2 million (the debt) was owed
by the appellant to the DRC when the garnishee
proceedings commenced.
On 16 September 2010 the respondent issued two separate notices in
terms of rule 45(12)(
a
). The first directed the sheriff to
attach the debt and the second, (which I will henceforth refer to as
‘the garnishee notice’)
called upon the appellant to pay
the amount of the debt to the respondent. The garnishee notice was
served on the respondent on
20 September 2010. The appellant refused
to pay the sheriff the amount demanded of it. As a result, the
respondent approached the
South Gauteng High Court for an order in
terms of rule 45(12)(
b
), that the appellant show cause
why it should not pay the sheriff the amount of the debt in
satisfaction of the respondent’s
writ of execution. The
application was opposed. The appellant disputed that the respondent
was entitled to invoke the provisions
of rule 45(12)(
b
) in the
prevailing circumstances and various grounds of defence were raised.
The court below dismissed these contentions and granted
an order
authorising the garnishee notice. The appellant was also ordered to
pay the costs of the application. The present appeal
is with the
leave of the court below.
[4] The respondent
contended, in limine, that the appeal was moot and will have no
practical effect or result as the appellant is,
on its own admission,
not able to comply with a court order to pay the debt. Moreover, the
issues raised in the appeal are said
not to be of any public interest
as to warrant this court exercising its discretion and hearing the
appeal.
[5] Section 21A(1)
of the Supreme Court Act 59 of 1959 empowers the court to dismiss an
appeal if it would not have any practical
effect or result. It is
well settled that mootness does not constitute an absolute bar to the
justiciability of an issue and that
the court has discretion whether
or not to hear a matter. The test is one of the interests of justice.
A relevant consideration
is whether the order the court makes will
have any practical effect either on the parties or on others, and in
the exercise of
its discretion a court may decide to resolve an issue
that is moot if to do so will be in the public interest. This will be
the
case where it will either benefit the larger public or achieve
legal certainty (
Van Wyk v Unitas Hospital & another
[2007] ZACC 24
;
2008
(2) SA 472
(CC) para 29. See, also,
Executive Officer, Financial
Services Board v Dynamic Wealth Limited and others
2012 (1) SA
453
(SCA) paras 43 and 44 and the reference therein to the decision
in
R v Secretary of State for the Home Department, Ex parte Salem
[1999] 2
All ER
42
(HL) at 47d-f). See, also,
Independent
Electoral Commission v Langeberg Municipality
[2001] ZACC 23
;
2001 (3) SA 925
(CC) para 9).
[6] In my view, it
cannot be said that the appeal will have no practical effect or
result. The respondent has indicated that it
will in due course apply
for the winding-up of the appellant. In addition, the appeal
involves, a decision on an important question
- the proper
construction and legal effect of garnishee proceedings brought under
rule 45(12) and its inter-relationship with the
provisions of rule
45(8). It will therefore be of benefit to the larger litigating
public and it is necessary that legal certainty
as to interpretation
of the procedural machinery provided for in rule 45(12) be obtained.
It is thus in the public interest that
this court entertain the
appeal.
[7] I turn therefore
to consider what is, essentially, the principal issue in the appeal:
whether it is a requirement of rule 45(12)(
a
) that the sheriff
should attach the debt in accordance with the procedure envisaged in
rule 45(8). The garnishee machinery
provided for in rule 45(12),
as far as is relevant, reads:
‘
(12)
(a)
Whenever
it is brought to the knowledge of the sheriff that there are debts
which are subject to attachment, and are owing or accruing
from a
third person to the judgment debtor, the sheriff may, if requested
thereto by the judgment creditor,
attach
the same, and thereupon shall serve a notice on such third person,
hereinafter called the garnishee
,
requiring payment by him to the sheriff of so much of the debt as may
be sufficient to satisfy the writ, and the sheriff may,
upon any such
payment, give a receipt to the garnishee which shall be a discharge,
pro
tanto
,
of the debt attached.
(b)
In the event of the
garnishee refusing or neglecting to comply with any such notice, the
sheriff shall forthwith notify the judgment
creditor and the judgment
creditor may call upon the garnishee to appear before the court to
show cause why he should not pay to
the sheriff the debt due, or so
much thereof as may be sufficient to satisfy the writ, and if the
garnishee does not dispute the
debt due, or claimed to be due by him
to the party against whom execution is issued, or he does not appear
to answer to such notice,
then the court may order execution to
issue, and it may issue accordingly, without any previous writ or
process, for the amount
due from such garnishee, or so much thereof
as may be sufficient to satisfy the writ.’ (emphasis added)
[8] Rule 45(8)
prescribes the manner in which an attachment is to be made, and reads
in material part as follows:
‘
(8) If
incorporeal property, whether movable or immovable, is available for
attachment, it may be attached without the necessity
of a prior
application to court in the manner hereinafter provided:
...
...
(c)
In the case of the
attachment of all other incorporeal property or incorporeal rights in
property as aforesaid,
(i) The attachment shall only be
complete when-
(a)
Notice of the
attachment has been given in writing by the sheriff to all interested
parties and where the asset consists of incorporeal
immovable
property or an incorporeal right in immovable property, notice shall
also have been given to the registrar of deeds in
whose deeds
registry the property or right is registered, and
(b)
The sheriff shall have
taken possession of the writing or document evidencing the ownership
of such property or right, or shall
have certified that he has been
unable, despite diligent search, to obtain possession of the writing
or document;
(ii) The sheriff may upon
exhibiting the original of the warrant of execution to the person
having possession of property in which
incorporeal rights exist,
enter upon the premises where such property is and make an inventory
and valuation of the right attached.’
[9] Counsel were
agreed that it is a requirement of rule 45(12)(
a
) that the
debt owed by the garnishee to the judgment debtor be attached, but
differed as to the manner in which this was to be
achieved. The
appellant contended that the attachment must be effected in
accordance with the procedure outlined in rule 45(8)(
c
)
whereas the respondent argued that mere service of the garnishee
notice on the garnishee serves as an attachment. If the appellant’s
contention is correct there was no effective attachment as
contemplated by the rule and this precluded the court below from
granting
the relief it did.
[10] The appellant
maintained that on a literal interpretation of rule 45(12)(
a
)
it is plain that an attachment of the debt is required. The rule
expressly provides that the sheriff may, if requested by the
judgment
creditor, attach the debt and serve a notice on the third party.
Accordingly, that wording does not permit the construction
sought to
be placed upon it by the respondent.
[11] The appellant
also submitted that rules 45(8) and (12) should be read together and
in the context of rule 45 which regulates
the execution process. By
reading rule 45(12)(
a
) in isolation, it was contended, the
provision for the attachment of the debt would not only be inchoate
but a departure from the
long-standing practice in garnishee
proceedings that there be an attachment. Whilst the service of a
garnishee notice may have
constituted an attachment of a debt under
the common law, an attachment of that nature only followed upon an
application to court
on notice to the debtor and the creditor in
respect of the debt and upon the court sanctioning the issue and
service of the garnishee
order. (see
Bergmann v Colonial
Government
(1907) 24 (SC) 703 at 706;
Reinhardt v Ricker and
David
1905 TS 179
at 186-188). Accordingly, it was submitted that
because notice was not given to the DRC, and no endeavour had been
made to effect
an attachment in terms of rule 45(8)(
c
) the
garnishee proceedings were ineffective.
[12] On the other
hand, the respondent invoked the case of
Reichenberg v Röntgen
1983 (3) SA 745
(W) in support of its contention that mere service of
the garnishee notice on the garnishee constitutes an attachment. Its
reliance
on that decision was, in my view, misplaced. In that matter
the amount owing by the garnishee to the judgment debtor was attached
pursuant to two writs of execution. The court concluded (at 747H)
that by reason of the attachment the defendant had become obliged
to
pay the debt to the judgment creditor. The judgment in
Reichenberg
is thus no authority for the proposition that mere service of the
garnishee notice operates as an attachment of the debt. Nor is
it
authority for the proposition that the recognised procedure for the
attachment of incorporeal property as set out in rule 45(8)
is
inapplicable.
[13]
Respondent’s counsel also relied on several foreign
authorities
1
to
buttress its aforesaid contention. Since garnishee proceedings are
governed by the Uniform Rules, it is unhelpful, if not irrelevant,
to
rely on foreign authorities as an aid to interpretation of the rules.
Whilst broadly similar procedures are followed in the
jurisdictions
referred to, none of the authorities relied upon deals with the
essential question under consideration.
[14] A further
argument advanced on behalf of the respondent was that the attachment
procedure in rule 45(12) applies to the exclusion
of the procedure
contained in rule 45(8). The latter, it was submitted, deals with a
different subject matter, namely, execution
against the judgment
debtor’s own property. This contention is clearly without
substance. There is no principled reason why
the attachment of a debt
in the hands of a third party should be treated differently to the
attachment of a judgment debtor’s
incorporeal property. The
following remarks of Howie J in
Cape Town Municipality and Another
v Allianz Insurance Co Ltd
1990 (1) SA 311(
C
)
are
apposite:
‘
One
must bear in mind that a “right” and a “debt”
are, after all, merely opposite poles of one and the same
obligation…. Essentially, therefore, claiming payment of the
debt is no different in principle from enforcing the right
to payment
of the debt.’
[15] Finally, it was
suggested that support for the respondents contention is to be found
in the following phrase which appears
in rule 45(12)
(b
):
‘
the
court may order execution to issue…without any previous writ
or process, for the amount due from such a garnishee…
as may
be sufficient to satisfy the writ.’
It was argued that
the fact that rule 45(12)(
b)
provides that the court may order execution ‘without
any previous writ or process’ was an indication that a separate
or prior attachment of the debt was not required in order to invoke
garnishee proceedings under rule 45(12). It was also submitted
that
in the light thereof the words ‘attach the same…’
which appear in rule 45(12)(
a
)
were tautologous. This contention is incorrect. As is evident from
the history of the rule as outlined below, the ‘previous
writ
or process …’ was a reference to the proceedings, which
under the common law, had to be instituted against the
garnishee
before an attachment of the debt could be made.
[16] Rule 45(12)
must be viewed against the backdrop of the common law and the
procedural position that obtained immediately before
its
introduction. Under the common law a special application to court was
always required in order to attach the debt owing by
a third person
to the judgment debtor. (See the
Bergmann and Reinhardt
cases
supra;
Van Zyl’s Judicial Practice
4
th
ed at
254 and Herbstein & Van Winsen
The Civil Practice of the High
Courts of South Africa
5
th
ed at 1039.) The
requirement that an attachment of the debt be effected in garnishee
proceedings has consistently been followed
by our courts, save that
under the present rules the attachment may be effected without the
necessity of a prior application to
court.
[17] Rule 45(12) was
inserted into the rules by GN R235 of 18 February 1966, and is based
on the wording of the old Cape rule 39.
Before the introduction of
the rule a creditor was obliged, except in the Cape and Natal, after
effecting an attachment of the
debt, to approach the court by way of
application for an order calling upon the garnishee to show cause why
the debt should not
be paid to the sheriff in satisfaction of the
writ in execution. The reason for the introduction of the rule was to
provide a uniform
mechanism based on the old Cape rule obliging the
garnishee to pay the attached debt to the creditor and not the
judgment debtor.
[18] The case of
Simpson v Standard Bank of South Africa Limited
1966 (1) SA
590
(W) is illustrative of the position that obtained before the
introduction of rule 45(12). There, a divorced wife applied for an
order that a bank pay to her moneys due by her ex-husband. The moneys
standing to the credit of the bank account constituted a
right of
action which her ex-husband (the judgment debtor) had against the
bank. She launched the application without first issuing
a writ of
execution and effecting an attachment of her ex-husband’s claim
against the bank. Galgut J said the following in
regard to the
procedure followed:
‘…
[I]t
seems to me that the procedure which the applicant should have
followed is, firstly, to have issued a writ of execution as
provided
for in Rule 45(8)
(c)
.
In terms of that writ the Deputy Sheriff will in the meantime attach
the claim against the bank so that the money in the bank
account
cannot be paid over to the ex-husband (
cf.
the order made in
Ex
parte Crous
,
1913 Transvaal Provincial Division 648 at pages 649 to 650).
Thereafter or at the same time she could have approached the court
by
way of application for an order calling upon her ex-husband to show
cause why the bank (
ie
the so-called garnishee) should not be directed to pay over to the
Deputy Sheriff on a fixed day so much of the moneys in their
hands,
to which her ex-husband is entitled, towards satisfaction of the writ
of execution issued out of this court, and in the
event of the bank
having any reason for refusing to make such payment, directing the
bank to appear and show cause why it should
not make the required
payment to the Deputy Sheriff …’.
[19]
Simpson
was delivered on 25 December 1965, shortly before the introduction of
rule 45(12). What emerges from that case is that rule 45(8)
must be
employed when effecting an attachment of incorporeal property
including the attachment of a debt owing by a third person
to the
judgment debtor. Rule 45(12) did not, as was suggested by the
respondent, dispense with the attachment requirement, or create
a
discreet attachment procedure. What it in fact did was to establish
the machinery necessary to oblige the garnishee to pay the
attached
debt to the judgment creditor.
[20] The need to
attach the debt is self evident. An attachment in execution creates a
pignus judiciale
the effect of which is that control of the
property attached passes from the judgment debtor to the officer
entrusted with the
execution of the writ, the dominium of the debt
remaining with the judgment debtor (see
Liquidators Union and
Rhodesia Wholesale Ltd v Brown & Co
1922 AD 549
at 558-9).
The necessity for an attachment of incorporeal property such as a
debt was described by Innes CJ in
Reinhardt
supra at 187.
‘
(T)he
essential to be observed in all cases of the attachment of debts is
that the debtor should receive due notice, so that he
may be warned
not to discharge his obligation to his original creditor, and so that
he may have an opportunity of coming to the
Court for relief in case
he wishes to raise the question of the validity of the debt, or any
lien, discharge or other matter which
would operate in his favour.’
[21] Were the
respondents contentions correct, only the garnishee, to the exclusion
of all other interested parties, including the
judgment debtor, would
have notice of the attachment. This would redound to their prejudice.
By reason of rule 45(8)(
c
)(
i
)(
a)
an attachment
is only complete once the sheriff has given notice in writing ‘to
all interested parties’. See
Stratgro Capital (SA) Ltd v
Lombard NO and others
2010 (2) SA 530
(SCA) paras 15-17. Compare
Schmidt v Weaving
[2008] ZASCA 123
;
2009 (1) SA 170
(SCA) paras 15-21.
[22] The argument of
the respondent fails to take account of the plain language employed
in rule 45(12)(
a
) and in particular the words
‘
[a]ttach
the same, and thereupon shall serve a notice on such third person…’
The adverb
‘thereupon’ ‘is of particular significance.’
The Shorter Oxford English Dictionary 6 ed Vol 2
p 3234 ascribes the
following meanings to it:
(1) ‘Upon that or it; Upon
that (in time or order)’;
(2) ‘On that being done or
said; (Directly) after that’;
(3) ‘On that subject or
matter with reference to that.’
Given the context in
which the adverb appears in rule 45(12)(a) the first two meanings
ascribed thereto are appropriate.
Properly interpreted
the phrase ‘
[a]ttach the same, and thereupon shall serve
a notice on such third person…’ envisages
two
separate jural acts (a) an attachment of the debt and (b) service
upon the garnishee of the prescribed notice.
[23] For these
reasons I conclude that it is indeed a necessary requirement of rule
45(12)(
a
) that the sheriff attach the debt in accordance of
rule 45(8)(
c
). Such attachment coupled with service of the
garnishee notice has the effect, as in English law and other foreign
jurisdictions,
of prohibiting the person upon whom the garnishee
notice is served from parting or dealing with the debt pending the
outcome of
the garnishee proceedings. It is by virtue of the
attachment that the garnishee becomes obliged to pay not the judgment
debtor
but the judgment creditor (see
Reichenberg
(
supra
)
at 747H
in fin
; as also the cases there cited, namely
Paramount Furnishers v Lezar’s Shoe Store & Outfitters
1970 (3) SA 361
(T) at 364-365 and
African Distillers Limited and
others v Honiball and
another
1972 (3) SA 135
(R) at 136H.
[24] In the present
instance it is common cause that no notice was given to the DRC and
that no endeavour was made by the sheriff
to effect an attachment in
accordance with rule 45(8)(
c
). Accordingly, the garnishee
proceedings were rendered ineffective and the court below had erred
in granting the order that it
did. For these reasons the appeal
should succeed. This conclusion renders it unnecessary to decide the
other issues raised in the
appeal.
[25] The following
order is made:
1 The appeal
succeeds with costs including the costs of two counsel;
2 The order of the
court below is set aside and the following order substituted for it:
‘
The
application is dismissed with costs, including the costs of two
counsel.’
__________________________
P BORUCHOWITZ
ACTING JUDGE OF
APPEAL
Appearances:
Appellant: A. O Cook
SC (with him G M Ameer)
Instructed by
Norton Rose South
Africa, Sandton
Webbers,
Bloemfontein
Respondent: L.J.
Morrison SC (with him N Dayand-Ingroop)
Instructed by
Webber Wentzel,
Johannesburg
Lovius-Block,
Bloemfontein
1
Reference
was made to
Rekstin v
Severo Sibirsko & Co and the Bank for Russian Trade Limited
[1933] 1 KB 47 where the
Court of Appeal held, (at 70), that –
‘
[T]he
effect of the service of garnishee order
nisi
is, according to Lord Watson in
Rogers
v Whiteley
(4), to make the garnishee ‘custodier’ for the court of
the whole funds attached.’
In
Rekstin
(at 71) the court applied the finding of Atkin LJ in
Joachimson
v Swiss Bank Corporation
[1921] 3 KB 110
at 131, that –
‘
[T]he
service of the order
nisi
binds the debt in the hands of the garnishee – that is,
creates a charge in favour of the judgment creditor.’
The dictum of
Atkin LJ was followed in
Choice Investments Limited v
Jeromnimon (Midland Bank Limited, garnishee)
[1981] 1 All ER 225
at 227 where Lord Denning stated that:
‘
[A]s
soon as the garnishee order
nisi
is served on the bank, it operates as an injunction. It prevents the
bank from paying the money to its customer until the garnishee
order
is made absolute, or is discharged, as the case may be. It binds the
debt in the hands of the garnishee, that is, creates
a charge in
favour of the judgment creditor … the ‘attachment’
is not an order to pay. It only freezes the
sum in the hands of the
bank until the order is made absolute or is discharged.’
Reference was also
made to American jurisprudence and in particular to the case of
Harbor Bank of Maryland v Hanlon Park Condominium
153 Md. A
pp 554, 834A 2d 993, 51.U.C.C. Rep. Serv. 2d 903 (2003) in
which it was held that –
‘
[A]
writ of garnishment “preserves the assets of the judgment
debtor by creating an ‘inchoate lien’ that is
binding
and prevents the garnishee from disposing of those of the assets in
his possession until such time as a judgment is entered
in the
garnishment proceedings” . . . The general rule is that “once
the writ of garnishment is issued and laid in
the hands of the
garnishee, he is bound to safely keep the assets of the debtor in
his possession”.’