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[2009] ZASCA 142
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Stratgro Capital (SA) Ltd v Theodorus NO and Others (417/08) [2009] ZASCA 142; 2010 (2) SA 530 (SCA) ; [2010] 3 All SA 27 (SCA) (23 November 2009)
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA
JUDGMENT
Case number: 417/08
In the matter between:
STRATGRO CAPITAL (SA)
LIMITED APPELLANT
and
LOMBARD LODEWYK THEODORUS NO FIRST RESPONDENT
LOMBARD LORRAINE
SONJA NO SECOND RESPONDENT
GELDENHUYS BARTHOLOMEUS NO THIRD
RESPONDENT
LOMBARD LODEWYK THEODORUS FOURTH RESPONDENT
Neutral citation:
Stratgro Capital v Lombard
(417/2008)
[2009] ZASCA 142
(23 November 2009)
CORAM: Mpati P, Mthiyane, Snyders JJA
et
Leach, Bosielo
AJJA
HEARD: 17 August 2009
DELIVERED: 23 November 2009
SUMMARY
: Magistrates' Court Rule 45(8) – writ of execution and
notice of attachment of incorporeal movable property – failure
to give
notice of attachment to execution debtor renders attachment incomplete –
attachment and subsequent sale in execution
null and
void.
ORDER
On appeal from
: High Court of South Africa, Witwatersrand Local
Division, (Selvan AJ sitting as court of first instance).
1. The appeal is
allowed.
2. The Theo Lombard Family Trust and the fourth respondent are ordered to pay
the appellant’s costs of appeal jointly and severally,
the one paying the
other to be absolved, on the scale as between attorney and client.
3. The order of the court below is set aside and replaced with the
following:
‘(a) The attachment and subsequent sale in execution, on 24 January
2007, of the applicant’s claim against the Theo
Lombard Family Trust to
the fourth respondent are set aside.
(b) The Theo Lombard Family Trust and the fourth respondent are ordered to
pay the costs of the application jointly and severally,
the one paying the other
to be absolved, on the scale as between attorney and
client.’
JUDGMENT
MPATI P
(Mthiyane, Snyders JJA
et
Leach, Bosielo AJJA
concurring)
[1] The issue in this appeal is
whether the attachment of the appellant's claim against the first to third
respondents, in their
representative capacities as trustees of the Theo Lombard
Family Trust ('the Trust'), and its subsequent sale in execution should
be set
aside on grounds of alleged defects in the attachment process and sale in
execution, or alleged
mala fide
abuse of court process. The successful
bidder at the sale in execution was the fourth respondent, acting in his
personal capacity.
[2] The Trust was the owner of certain fixed property
known as erf 5710, Pietersburg ('the property'). On or about 18 June 2001 the
appellant, duly represented by Mr Darryl Charles Ducasse ('Ducasse'), concluded
a written agreement with the Trust, represented by
Mr André Lombard ('the
fourth respondent's son’), in terms of which the appellant purchased the
property at a purchase
price of R8 925 000. The agreement was
conditional upon the appellant's ability to raise finance for the full purchase
price. The condition was not fulfilled and the agreement ultimately
lapsed.
[3] But when he could not raise the necessary finance, Ducasse,
in collaboration with another entity, Blue Dot, introduced a third
party who
agreed to purchase the property for R10 500 000. In terms of an oral
agreement between the Trust and Ducasse,
on behalf of the appellant, the third
party was introduced on the basis that the profit would be shared: the Trust, as
seller, would
receive R9 million and the appellant R1.5 million. Upon transfer
of the property to the purchaser the latter's financiers, First
National Bank,
released an amount of R9 million. The balance was to be paid to the Trust upon
conclusion of a long term lease agreement
for the occupancy of part of the
property. The Trust and Ducasse agreed, in the meantime, that the appellant
would be paid R500 000
upon receipt by the Trust of the first tranche of R9
million and the rest (R1m) upon payment by First National Bank of the balance
of
the purchase price. But when the balance of the purchase price was paid the
Trustees refused to pay the amount owing to the appellant
in terms of the
agreement. They contended that the appellant's claim constituted commission and
that the appellant, not being a registered
estate agent, was precluded from
claiming payment of the sum still outstanding.
[4] The appellant then
instituted motion proceedings (the main application) in the Johannesburg High
Court against the Trust, seeking
an order for payment of the sum of R1m, being
the balance allegedly owing to it. The matter was referred to trial and set
down for
the hearing of oral evidence on 7 March 2007. In the interim, the Trust
obtained an order, with costs, in terms of which the appellant
was ordered to
provide security for the Trust's costs in the main action. The costs of the
application for the furnishing of security
were taxed on 18 September 2006 in an
amount of R27 431.24. The appellant was not represented at the taxation. A
copy of the
taxing master's
allocatur
was, however, sent to the
appellant’s attorneys under cover of a letter from the Trust's attorneys
dated 17 October 2006, in
which demand was made for payment of the taxed costs
by 20 October 2006, failing which, the writer asserted: 'I have an instruction
to proceed'.
[5] In response to the demand the appellant's attorneys
advised that payment was being processed. But despite this assurance the
Trust’s
attorneys still threatened ‘to proceed’. On 23 October
2006 the appellant’s attorneys dispatched a letter to them,
the last three
paragraphs of which read as follows:
'In the circumstances we reiterate our
submission in our previous letter namely that the institution of further legal
proceedings
and/or execution aimed at recovery of the taxed Bill of Cost is
unnecessary in the circumstances.
However, should your client choose to
execute on the Bill of Cost we request that you kindly notify us per telephone
or telefax whereupon
we will
furnish you with the current physical address of
the Plaintiff.
We hope that "reason will prevail" and look forward to
receipt of your favourable responses soonest.'
(The words in bold print in
the penultimate paragraph appear as such in the text of the
letter.)
[6] By 3 November 2006 payment had still not been made and in a
letter of the same date addressed to the Trust's attorneys, the appellant's
attorneys recorded that 'the payment of the costs was unfortunately delayed due
to two digits (of your trust banking account details)
having been inadvertently
transposed, but this error has been corrected and the amount has been paid into
your account'. The Trust's
attorneys responded on 8 November 2006 advising that
no payment had been received and that 'I am accordingly continuing with my
client's
instructions'. It appears, however, that during this exchange of
correspondence the Trust's attorneys caused to be issued a writ
of execution
directing the Sheriff 'to attach and take into execution the movable property of
the [appellant]'.
[7] Prior to seeking the order compelling the
appellant to furnish security for its costs the Trust instructed its attorneys
to conduct
a search, through the office of the Registrar of Companies, to
ascertain the address of the appellant's registered office. The address
yielded
by the search was 1
st
Floor, Chloride House, 4 Boundary Road,
Johannesburg, which is different from the address given by Ducasse when he
deposed to the
appellant's founding affidavit in the main application. There, Mr
Ducasse alleged that the appellant 'carries on business as a property
investment
company and has its registered office at 43 Wessels Road, Rivonia,
Gauteng’.
[8] The Trust had also established that the appellant
had no physical assets available for attachment. In its answering affidavit,
deposed to by the first respondent in his representative capacity, the Trust
says the following:
'25. As set out above the Trust's investigations revealed
that the appellant did not have any place of business or physical assets
available for attachment. The only asset of the applicant of which the Trust was
aware was the appellant's cause of action against
the Trust in the main
proceedings. The Trust accordingly instructed its attorney to cause the Sheriff
to attach such right of action
and have it sold in execution of the taxed Bill
of Costs.
26. As also set out above, the registered office of the applicant
at all material times was at 1
st
Floor Chloride House, 4 Boundary
Road, Highlands North, Johannesburg, the name of which building had since been
changed to Frameworks
House. As the applicant was not carrying on business, this
was the only address at which execution could be levied. . . .
27. As set
out above, the applicant had been made aware in the application for security for
costs that the address which the applicant
had given in the main proceedings as
its registered office was not in fact its registered
office.'
[1]
The Sheriff was thus
instructed to execute at the appellant’s registered address and on 30
October 2004 he recorded in his 'Return
of Non Service' that the writ 'could not
be executed' and ‘the [appellant] is unknown to Mrs van der Laan in charge
at Frameworks
present occupier'.
[9] But despite the Sheriff’s
Return of Non-service and its own prior knowledge that the appellant was unknown
at its registered
address the Trust, through its attorneys, nevertheless
instructed the Sheriff to 'attach the [appellant's] right of action by service
of the warrant of execution at [its] registered office'. In line with these
instructions the Deputy Sheriff, Mr Van Dijk, furnished
a Return of Service
recording that on 22 November 2006 the writ of execution 'was duly served by
affixing a copy thereof to the principal
door of SELBY & COMPANY which was
found closed'.
[2]
The Return of
Service further recorded the following:
'I HEREBY DO ATTACH THE [APPELLANT'S]
CLAIM AGAINST THE LOMBARD FAMILY TRUST AND OTHERS UNDER CASE NUMBER 03/23807.
YOUR FURTHER INSTRUCTIONS
ARE HEREWITH AWAITED.
COPIES LEFT AT FRAMEWORKS ON
1
ST
FLOOR AT FRAMEWORKS HOUSE 4 BOUNDARY ROAD
ROUXVILLE.'
[10] The sale in execution was duly advertised in two
newspapers and subsequently held on 24 January 2007. According to the Sheriff's
‘Return of Warrant of Execution Against Property’ (the return in
respect of the sale in execution), the 'movable assets'
sold in execution
realised the sum of R1 500. As indicated, the successful 'bidder' was the
fourth respondent.
[11] It is clear from these facts, and indeed common
cause, that although the Trust’s attorneys had threatened to recover their
client’s taxed costs by way of execution, the appellant was kept in the
dark about the entire attachment process and ultimate
sale in execution. Certain
correspondence was exchanged between the parties' legal representatives relating
to the further conduct
of the main application, but no information on the
attachment process was disclosed. Nor was it disclosed during a pre-trial
conference
held on 1 December 2006. This was clearly on instructions from the
Trust. The following appears in its answering affidavit:
'Mr Barling [the
Trust's attorney] was instructed to comply strictly with the legal requirements.
If Mr Barling had advised the applicant
of the sale he would have been in breach
of his duty to the Trust and would have acted contrary to the instructions given
to him
by his client.'
The withholding of information on the attachment
process was thus deliberate. Not surprisingly, the Trust’s attorney must
have
felt uncomfortable with his instructions to withhold information from the
appellant on the attachment. He sought, and received, an
assurance from the Law
Society of the Northern Provinces that he was under no duty to notify the
appellant of the attachment.
[12] The appellant's attorneys were advised
of the sale in execution by letter dated 26 January 2006. They were also
advised, in the
letter, that they should withdraw as attorneys of record in the
matter as the fourth respondent, who had purchased the appellant's
right of
action, wished to appoint his own attorneys in the further conduct of the
matter. On 30 January 2007 payment in respect
of the Trust's taxed costs was
made by way of electronic transfer into the trust account of the Trust's
attorneys. Following further
correspondence between the parties' respective
attorneys the appellant instituted motion proceedings seeking, against the
trustees
of the Trust and the fourth respondent, an order, inter alia, setting
aside the attachment and sale in execution of its right, title
and interest in
its claim against the Trust. The court a quo (Selvan AJ) dismissed the
application with costs. This appeal is with
its leave.
[13] In this court
the appellant’s case was advanced on two fronts. The first was that the
attachment and subsequent sale in
execution of its right, title and interest in
its claim against the Trust were invalid for want of compliance with the
provisions
of Rule 45(8) of the Uniform Rules of Court ('the Rules'). The second
was that the execution process had not been invoked for the
purpose for which it
was intended, which is to obtain satisfaction of a judgment debt (in this case
to recover taxed costs), but
for the 'sinister purpose of quelling the
litigation'. This, so it was argued, constituted an abuse of the court process
which should
not be countenanced.
[14] Elaborating on the first of the
two fronts (the alleged invalidity of the execution process for want of
compliance with Rule
45(8)) counsel for the appellant submitted that the
execution process was fatally flawed because (a) the attachment was fatally
defective
as, inter alia, nothing was attached, and (b) the advertisements were
fatally defective because no information relating to the claim
was published. It
was accordingly contended that the sale was null and void because nothing had
been sold or transferred. It was
also argued, on behalf of the appellant, that
the attachment and sale in execution fall to be set aside for failure, on the
part
of the sheriff, to give written notice of the attachment to all interested
parties as required by Rule 45(8)(c)(i)(a).
[15] Rule 45(8)
reads:
'(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:
(a)
Where the property or right to be attached is a lease or a bill of
exchange, promissory note, bond or other security for the payment
of money, the
attachment shall be complete only when –
(i) notice has been given by the sheriff to the
lessor and lessee, mortgagor and mortgagee or person liable on the bill of
exchange
or promissory note or security as the case may be, and
(ii) the
sheriff shall have taken possession of the writing (if any) evidencing the
lease, or of the bill of exchange or promissory
note, bond or other security as
the case may be . . .
(b)
Where movable property sought to be attached is the interest of the
execution debtor in property pledged, leased or sold under suspensive
condition
to or by a third person, the attachment shall be complete only when the sheriff
has served on the execution debtor and
on the third person notice of the
attachment with a copy of the warrant of execution . . .
(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.'
[16] A litigant's right, title and
interest in a claim constitutes incorporeal property which may be attached at
the instance of
a judgment creditor and sold in
execution.
[3]
Consequently, in
attaching the appellant's claim against the Trust the respondent was obliged to
comply with the provisions of rule
45(8). By reason of rule
45(8)(c)(i)(
a
), an attachment of the right, title and interest of a
litigant in an action will only be complete once the sheriff has given notice
of
the attachment in writing 'to all interested parties'. This rule is couched in
wide terms and there seems to be no reason to regard
the appellant, whose claim
in the main proceedings was attached, as not being an 'interested party' as
contemplated therein. Both
sub-rules 45(8)(a)(i) and (b), which relate to the
attachment of certain specific incorporeals, require notice to be given to the
execution debtor whose incorporeal property or right is the subject of an
attachment in order for such attachment to be complete.
The framer of the rules
could have had no good reason to distinguish between the incorporeal property
specified in those two sub-rules
and any other incorporeal property in providing
for notice of an attachment to be given to a judgment debtor. After all, it
would
be absurd to require a judgment debtor to be given notice should its lease
with a third party be attached (rule 45(8)(a)(i)), but
not if its claim for
payment of rentals due under the lease was the subject of the attachment. Had
the drafter of the rules not intended
to refer to all interested third parties
in sub-rule 45(8)(c)(i)(
a
) but intended to exclude from its operation the
judgment debtor whose incorporeal was being attached, it would have been a
simple
matter to have said so. It did not.
[17] I therefore conclude
that the appellant was clearly an interested party as envisaged by rule
45(8)(c)(i)(
a
) in regard to its claim against the Trust which was
purportedly attached, and the failure to give it notice resulted in the
attachment
being incomplete. It follows that the subsequent sale in execution
was null and void.
[18] It may be mentioned that it is clear from a
perusal of the judgment of the court a quo that in that forum counsel for the
appellant
did not argue that the appellant was an interested party as
contemplated in rule 45(8)(c)(i)(a). I draw this conclusion from the
following
passage in the judgment:
'Another objection is put forward by the applicants'
counsel to the actions of the sheriff. Reliance is placed upon the provision
embodied in Rule rule 45(8)(c)(i)(a), that the sheriff should give notice of the
attachment of incorporeal property to . . . 'all
interested parties . . .
without which, in the words of the Rule, "The attachment shall not be complete".
Counsel goes on to submit
that there were a number of interested parties who
were entitled to receive notice, those being Blue Dot to whom the applicant was
allegedly contractually obliged to pay half of the claim against the Trust, one
Sohn who holds an undertaking from the applicant
to make payment of monies owed
to them out of the proceeds of the claim, and "Martins, who has a lien over the
documentation relative
to the litigation". Martins is the applicant's
attorney.'
The court a quo rejected these submissions and held that the
phrase 'interested parties' in the Rule 'connotes someone who has an
interest in
the right, which is the subject matter of the attachment, not someone who has an
indirect pecuniary interest.'
[19] The conclusion I have reached, ie
that the failure to give notice to the appellant resulted in the attachment
being incomplete,
renders a consideration of all the other contentions advanced
on behalf of the appellant unnecessary. It suffices merely to state
that the
actual attachment process is in itself suspect. It is doubtful whether there was
compliance with the requirements of rule
45(8)(c)(i)(b).
[4]
However, I express
no firm view on this issue.
[20] The question of costs remains. Counsel
for the appellant submitted that this court should show its displeasure at the
objectionable
conduct of the Trust by awarding costs, in both courts, on the
scale as between attorney and client. I agree. Counsel also argued
that
liability for the appellant’s costs should be joint and several as against
the Trust and the trustees as its representatives.
I am not inclined to accede
to this request. Although the Trust’s instructions to its attorneys would
have emanated from the
trustees, they did so in a representative capacity. There
is no evidence that they would have enjoyed personal gain had the Trust’s
actions not been found to have been reprehensible. There is no reason, however,
why the fourth respondent, who purchased the appellant’s
claim in his
personal capacity and who has participated in these proceedings in his personal
capacity, should not be held jointly
liable, with the Trust, for the
appellant’s costs.
[21] In the result, the following order is
made:
1. The appeal is allowed.
2. The Theo Lombard Family Trust and the fourth respondent are ordered to pay
the appellant’s costs of appeal jointly and severally,
the one paying the
other to be absolved, on the scale as between attorney and client.
3. The order of the court below is set aside and replaced with the
following:
‘(a) The attachment and subsequent sale in execution, on 24 January 2007,
of the applicant’s claim against the Theo Lombard
Family Trust to the
fourth respondent are set aside.
The Theo Lombard
Family Trust and the fourth respondent are ordered to pay the costs of the
application jointly and severally, the
one paying the other to be absolved, on
the scale as between attorney and client.’
............................
L MPATI
JUDGE OF APPEAL
Counsel for the Appellants: P
Tredoux
Instructed by: Martins
Attorneys
Westlake
Correspondents: Phatshoane Henney
Inc
Bloemfontein
Counsel for the Respondents: N
Segal
Instructed by: Norman Barling
Attorney
Johannesburg
Correspondents: Rosendorff Reitz
Barry
Bloemfontein
[1]
The Trust's attorneys
apparently also established that the appellant did not occupy the premises at 43
Wessels Road, Rivonia, Gauteng,
and was not known at those premises.
[2]
Selby & Company were the
occupiers at 1
st
Floor, Chloride House, 4 Boundary Road,
Johannesburg. 'Chloride House' had been changed to 'Framework
House'.
[3]
See eg
Marais v
Aldridge
1976 (1) SA 746
(T) at 750A-C;
Brummer v Gorfil Brothers
Investments (Pty) Ltd
1999 (3) SA 389
(SCA).
[4]
Compare
Badenhorst v
Balju, Pretoria Sentraal
1998 (4) SA 132
(T).