Tsung and Another v Industrial Development Corporation of South Africa Ltd. and Another (079/05) [2006] ZASCA 28; 2006 (4) SA 177 (SCA); [2013] 2 All SA 556 (SCA) (23 March 2006)

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Tsung and Another v Industrial Development Corporation of South Africa Ltd. and Another (079/05) [2006] ZASCA 28; 2006 (4) SA 177 (SCA); [2013] 2 All SA 556 (SCA) (23 March 2006)

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THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
Case No 79/05
REPORTABLE
In the matter between:
ROBERT HSU-NAN TSUNG
FIRST APPELLANT
ROBERT
CHENG-LI TSUNG SECOND APPELLANT
and
INDUSTRIAL
DEVELOPMENT CORPORATION
OF SOUTH AFRICA
LIMITED FIRST RESPONDENT
FINDEVCO
(PTY) LTD SECOND RESPONDENT
Coram: Harms, Farlam,
Cameron, Jafta and Cachalia AJA
Heard: 10
March 2006
Delivered: 23 March 2006
Summary: Attachment to found or
confirm jurisdiction – consent to jurisdiction – after attachment
– cannot undo attachment.
Neutral citation:
Tsung v
Industrial Development Corp of SA Ltd
[2006] SCA 27 (RSA).
_______________________________________________________
JUDGMENT
________________________________________________
HARMS JA:
[1] This appeal raises the crisp
question whether a peregrine defendant, by consenting belatedly to
the local court’s jurisdiction,
can undo an attachment founding or
confirming jurisdiction. Alleging that they have a claim of some R40m
against the appellants in
terms of s 424 of the Companies Act 61 of
1973 for fraudulently or recklessly running a local company the
respondents, who are
incolae
(resident locally), sought and
obtained ex parte an order for the attachment of certain immovable
properties and shares belonging
to the appellants in the Cape High
Court. The appellants, who are resident in Hong Kong, are
peregrini
,
not only of that court but also of the Republic. They became aware of
respondents’ intention to attach and the existence of the
order
only after the actual attachment. On the return day they opposed the
finalisation of the order on the ground that, had they
known of the
intended proceedings, they would have consented to jurisdiction and,
in any event, since the attachment they have in
fact so consented
unconditionally. They did not contend that the respondents were not
otherwise entitled to the order sought. Traverso
DJP held that this
consent was too late and could not undo the attachment, and she
issued a final order. Against this the appellants
appeal with the
High Court’s leave.
[2] In order to avoid confusion it
should be pointed out at the outset that what is said in this
judgment is intended to apply to
those cases where the plaintiff (or
applicant) is an
incola
and the defendant (or respondent) is a
foreign
peregrinus
, ie, someone who is a
peregrinus
of
the Republic, and the claim is one sounding in money. The arrest or
attachment of goods of a local
peregrinus
(ie, someone who is
an
incola
of the country but not of the particular court) to
found or confirm jurisdiction is by statute not permitted.
1
[3] In the present context the
difference between an arrest or attachment
ad fundandam
jurisdictionem
and one
ad confirmandam jurisdictionem
is
of no consequence.
2
The reason is that if the defendant is a
peregrinus
and
whether or not the court has jurisdiction over the cause, eg, because
the cause of action arose within the jurisdiction or jurisdiction
exists
ratione delictus
or
ratione contractus
, an
attachment or arrest is essential for the exercise of jurisdiction:
‘a recognised
ratio jurisdictionis
by itself will not do’.
3
With ‘jurisdiction’ is meant the power to adjudicate upon a
particular case and to give effect to the judgment.
4
[4] The practice of arrest or
attachment to found or confirm jurisdiction was firmly established in
Holland by the 17th Century in
the interest of
incolae
and
from considerations of commercial convenience. It enabled them to
proceed in local courts against
peregrini
who were for the
time being physically within the jurisdiction area of the court or
possessed property there.
5
In addition to founding or confirming jurisdiction and to commence
proceedings, an attachment had since those days an additional
function and that was the provision of security enabling the
plaintiff, eventually, to execute in his own jurisdiction. Pending
the
finalisation of the proceedings, the defendant could not alienate
or encumber the attached property.
6
This function of attachment has since repeatedly been highlighted by
our courts, including by this Court some months ago.
7
[5] The arrest of a
peregrinus
,
it would appear, was used not only for founding or confirming
jurisdiction but also to coerce the
peregrinus
to pay.
8
Today arrest still serves to found or confirm jurisdiction but can,
obviously, no longer serve as security for a debt and, at least
in
this regard, there is a difference between arrest and attachment.
There are other aspects. As long as a century ago Van Zyl’s
Judicial Practice
9
recognised that an arrest ‘affects the liberty of the subject’;
and at present the arrest of a person has a constitutional
dimension.
10
[6] The rationale for jurisdiction is
often said to be one of effectiveness, and attachment is historically
and logically closely
related to this principle; but not only has the
principle of effectiveness been eroded
11
(Forsyth says ‘it is artificial and conceptual rather than
realistic’),
12
effectiveness is also not necessarily a criterion for the existence
of jurisdiction.
13
In one instance effectiveness is non-existent and that is in the case
of submission to jurisdiction (also referred to as prorogation).
The
reason is this: if a peregrine defendant has submitted – whether
unilaterally or by agreement – to the jurisdiction of the
court of
the
incola
, an attachment or arrest to found or confirm
jurisdiction is not only unnecessary, it is not permitted.
14
(Consent on its own cannot confer jurisdiction unless the plaintiff
is an
incola
.)
15
There are good commercial reasons for this.
16
‘
Foreigners
who submit voluntarily to the jurisdiction of our Courts should not
have to fear that thereafter they or their property
are at any time
and without notice subject to attachment whenever an
incola
can satisfy a Court that he has a
prima facie
case against
them.’
17
In
addition, the ensuing judgment will be internationally enforceable;
will be recognised by the courts of the defendant’s domicile;
and
binds the whole property of the defendant.
18
The downside is that the plaintiff will have to pursue the defendant
in order to have the judgment enforced.
19
[7] Applications for attachment or
arrest are as a matter of course brought without notice and the
plaintiff has, until submission,
the right to apply for such an order
and, if the requirements have been met, entitled to an order.
20
On the return day the court has to be satisfied that the applicant
has a prima facie case;
21
and that, on a balance of probabilities the applicant is an
incola
and the respondent a
peregrinus
and the property sought to be
attached is that of the respondent.
22
Whether submission is possible after the grant of the order but
before the attachment, was the subject of
Jamieson v Sabingo
2002
(4) SA 49
(SCA) para 30
where this Court held that ‘it is
not too late for a submission to jurisdiction to be given before the
attachment is put into effect.’
23
[8] That brings me then to the issue
in this case, namely whether an attachment can be undone by a late
consent. The case law in this
regard has a long lineage. The first
case in this regard was
Ellerton Syndicate v Hutchings
(1893)
3 CTR 124. De Villiers CJ decided the point laconically, holding that
the attachment served a double object namely to facilitate
proceedings and to obtain security and ‘if the law gave them [the
incolae
] that advantage, they were entitled to take it.’
24
Then there was
Bedeaux v McChesney
1939 WLD 128
at 132 where
Solomon J came to the same conclusion for the same reason. The issue
was again raised before Berman AJ in
Kasimov v Kurland
1987
(4) SA 76
(C) who decided to follow
Bedeaux.
He added that
Bedeaux
had to be right (at 81A) –
‘
for
otherwise every
peregrinus
whose property has been attached to
confirm jurisdiction could voluntarily submit to the Court’s
jurisdiction, thereby ensuring
the release of that property, and thus
frustrate the
incola
from executing against the already
attached property on obtaining a judgment in his favour. This would
effectively do away with one
of the objects of the attachment of the
property of a
peregrinus
.’
The judgment in
Blue Continent
Products (Pty) Ltd v Foroya Banki PF
1993 (4) SA 563
(C) was to
the same effect. Farlam AJ added another reason for the conclusion
(at 574F-G):
‘
If
a defendant only submits to the court’s jurisdiction once his goods
have been attached, there is the danger that a judgment thereafter
given against him may not be recognised internationally because he
may be able to contend in some other forum that his submission
was
not voluntary because it only took place after the arrest . . ..’
This judgment was followed in
Associated Marine Engineers (Pty) Ltd v Foroya Banki PF
1994
(4) SA 676
(C) 690B-E.
[9] In
Bettencourt v Kom
1994
(2) SA 513
(T) Hartzenberg J also held that a late consent cannot
undo an attachment but added that the
peregrinus
who belatedly
consents is not necessarily without redress. He said (at 517C-E):
‘
I
consider myself not to be entitled to set aside the attachment which
was validly made in this case. It is any event my view that
the
correct way to relieve the position of a defendant, who consents to
jurisdiction after an attachment and who is inequitably extorted
by
the attachment, even if he has a good defence, is by an application,
as was done in the case of
Banks v Henshaw
1963 (3) SA 464
(D). In such an application a Court ought to be at large to look at
all the circumstances of the case, such as the amount of the
claim,
the likelihood of the plaintiff succeeding, the financial position of
the defendant, the ease or otherwise of executing on
a judgment in
the country of domicile of the defendant, the hardship to the
defendant if the attachment remains and similar considerations.
The
Court can then decide if the attachment is to remain unaltered or if
it is to be reduced, set aside, or substituted with some
other form
of attachment or security.’
[10] There are two judgments that, on
the face of it, are in conflict with the foregoing. Both dealt,
however, with a submission by
a
peregrinus
who had been
arrested to found or confirm jurisdiction. Although the reasoning of
the first,
Small Business Development Corporation v Amey
1989
(4) SA 890
(W), is not easy to follow and while I disagree with the
reasoning in the second,
Ghomeshi-Bozorg v Yousefi
1998 (1) SA
692
(W) I agree – for the reasons given by Cameron J in
Himelsein
v Super Rich CC
1998 (1) SA 929
(W) – that they were, on their
facts, correctly decided. As I have mentioned, arrests differ from
attachments in two material respects:
since arrests do not provide
security, generally there can be no justification for detaining a
person who has consented to jurisdiction
after arrest and, secondly,
there is, as has been pointed out in
Himelsein
(at 936B-D) a
constitutional aspect where arrest and physical detention are
concerned.
[11] The appellants wish us to
overrule this line of authority for two reasons. The first is to make
a rule about late consent that
is compatible with
Jamieson
;
and the second is to make the rule fairer. The argument tends to lose
sight of the fact that, in the main, the function of courts
is to
apply the law and not to make law. A long established practice,
generally accepted and applied, should be followed
25
unless legally unwarranted and shown to have been wrong
26
or logically indefensible.
27
Obviously, if a rule of the common law is incompatible with
constitutional values, courts have a constitutional duty to develop
the
common law to accord with those values but it has not been
suggested that the rule in its present form is in this regard
deficient.
It has often been said that our law is a virile living
system which has to adapt itself to deal with new challenges and
changing
conditions but such development must be consistent with the
inherent basic principles of the law.
28
This enables higher courts after due reflection and on sound policy
grounds to change the direction of the law
29
because ‘the law must be sensitive to human development and social
change’
30
and ‘judges must necessarily look to the present and to the future
as well as to the past.’
31
On the other hand, as Curlewis J once remarked,
32
‘
commercial
undertakings (and indeed the public generally) require certainty from
our law rather than doctrinal purity or juristic
rightness’.
The
simple point is that the law is not seamless.
[12] The
Constitutional Court, in a similar vein, said this:
33
‘
In
exercising their powers to develop the common law, Judges should be
mindful of the fact that the major engine for law reform should
be
the Legislature and not the Judiciary. In this regard it is worth
repeating the dictum of Iacobucci J in
R v Salituro [(1992) 8CRR
(2d) 173,
[1991] 3 SCR 654]
, which was cited by Kentridge AJ in
Du Plessis v De Klerk
[1996] ZACC 10
;
[1996 (3) SA 850
(CC) para 61]
:
“
Judges
can and should adapt the common law to reflect the changing social,
moral and economic fabric of the country. Judges should
not be quick
to perpetuate rules whose social foundation has long since
disappeared. Nonetheless there are significant constraints
on the
power of the Judiciary to change the law. . . . In a constitutional
democracy such as ours it is the Legislature and not the
courts which
has the major responsibility for law reform. . . . The Judiciary
should confine itself to those incremental changes
which are
necessary to keep the common law in step with the dynamic and
evolving fabric of our society.'‘’
[13] Reverting to
the appellants’ argument, I do not believe that the rule under
consideration is incompatible with the rule in
Jamieson.
Prior
to the actual attachment under the court order, the court has not yet
jurisdiction in the cause, the litigation between the
parties has not
yet begun and, more importantly, the plaintiff holds no security. On
attachment there is a dramatic shift because
the court now has
jurisdiction, the litigation has begun and, significantly, the
plaintiff holds security. No policy reason has been
proffered as to
why the continued existence of such security should be subject to the
defendant’s whims. The reasons why it should
not be so have already
been given by the existing case law. As far as general fairness is
concerned, a
peregrinus
who enters into a consensual
arrangement with an
incola
can protect himself by, at that
stage already, consenting to jurisdiction or, if he is not prepared
to submit to a local court, by
stipulating that the
incola
will not be entitled to attach his goods for jurisdictional
purposes.
34
However, this is generally not possible where, as in this case, the
cause of action is not based on a consensual arrangement but
on a
wrongful act. It does not appear to me fair to expect the
incola
,
especially in those circumstances, to alert the
peregrinus
of
his intentions and invite him to submit to the local jurisdiction and
to place his possible security at risk. Money may leave
the
jurisdiction by the push of a button, shares can be disposed of by
the flick of a switch and air tickets can be bought over the
internet. In any event, the fairness argument was rejected for sound
reason by Scott JA in
Naylor
35
and it behoves me not to reopen the debate without good reason.
[13] The appeal stands to be dismissed
with costs of two counsel and it is so ordered.
____________
L
T C HARMS
JUDGE
OF APPEAL
CONCUR:
FARLAM
JA
CAMERON
JA
JAFTA
JA
CACHALIA
AJA
1
E.g
Supreme Court Act 59 of 1959 s 28.
2
Ghomeshi-Bozorg
v Yousefi
1998 (1) SA 692
(W)
where a contrary view was held is to that extent wrong.
3
Ewing
McDonald & Co Ltd v M & M Products Co
[1990] ZASCA 115
;
1991 (1) SA 252
(A) 258D-G;
Naylor v Jansen; Jansen v Naylor
[2005] 4 All SA 26
(SCA) para 20.
4
Steytler
NO v Fitzgerald
1911 AD 295
346;
Hugo v Wessels
1987 (3) SA 837
(A) 849H;
Veneta
Mineraria Spa v Carolina Collieries (Pty) Ltd (in liquidation)
1987
(4) SA 883
(A) 886D-E.
5
Owners
of SS Humber v Owners of SS Answald
1912 AD 546
at 555;
Siemens Ltd v Offshore Marine Engineering Ltd
[1993] ZASCA 87
;
1993 (3) SA 913
(A) 918E-H, 920C-J.
6
Thermo
Radiant Oven Sales (Pty) Ltd v Nelspruit Bakeries (Pty) Ltd
1969 (2) SA 295
(A) 306D-H.
7
Naylor
v Jansen; Jansen v Naylor
[2005] 4 All SA 26
(SCA) para 26.
8
JWW
(Sir John Wessels) ‘History of our law of arrest to found
jurisdiction’
(1907) 24
SALJ
390.
9
CH
van Zyl
The Theory of the Judicial Practice of the Colony of the
Cape of Good Hope
1 ed (1893) 121. The same statement appears in
later editions of this work called
The Theory of the
Judicial Practice of South Africa.
10
Himelsein
v Super Rich CC
1998 (1) SA 929
(W).
11
Thermo
Radiant Oven Sales (Pty) Ltd v Nelspruit Bakeries (Pty) Ltd
1969 (2) SA 295
(A) 300G-H.
12
Private
International Law
4 ed 215
quoted in
Hay Management Consultants v P3 Management Consultants
2005 (2) SA 522
(SCA) para 17.
13
Ewing
McDonald & Co Ltd v M & M Products Co
[1990] ZASCA 115
;
1991 (1) SA 252
(A) 260B.
14
Hay
Management Consultants v P3 Management Consultants
2005
(2) SA 522
(SCA) para 24;
American Flag plc v Great African
T-Shirt Corporation CC
2000(1) SA 356 (W) 377F.
15
Veneta
Mineraria Spa v Carolina Collieries (Pty) Ltd (in liquidation)
1987
(4) SA 883
(A) 893;
Hay Management Consultants v P3 Management
Consultants
2005 (2) SA 522
(SCA) para 21.
16
Hay
Management Consultants v P3 Management Consultants
2005
(2) SA 522
(SCA) para 17.
17
Elscint
(Pty) Ltd v Mobile Medical Scanners
1986 (4) SA 552
(W) 558B.
18
Jamieson
v Sabingo
2002 (4) SA 49
(SCA)
para 23-24.
19
Naylor
v Jansen; Jansen v Naylor
[2005] 4 All SA 26
(SCA) para 26.
20
Naylor
v Jansen; Jansen v Naylor
[2005] 4 All SA 26
(SCA) para 27 and 29.
21
Dabelstein
v Lane and Fey NNO
[2000] ZASCA 156
;
2001 (1) SA
1222
(SCA) para 7.
22
Bocimar
NV v Kotor Overseas Shipping Ltd
[1994] ZASCA 5
;
1994
(2) SA 563
(A).
23
See
also
Utah International Inc v Honeth
1987 (4) SA 145
(W);
Rosenberg v Mbanga (Azaminle Liquor (Pty) Ltd intervening)
1992 (4) SA 331
(E).
24
It
would appear that a
peregrinus
cannot by returning to the
country and becoming an
incola
undo the attachment:
Zakowski
v Wolff
1905 TS 32.
25
Rainbow
Diamonds (Edms) Bpk v SA Nasionale Lewensasuransiemaatskappy
1984 (3) SA 1
(A) 14I.
26
Bydawell
v Chapman NO
1953 (3) SA 514
(A) 521C-E;
Du Plessis v Strauss
1988 (2) SA 105
(A) 142E-H.
27
Ex
parte Kaplan and others NNO: in re Robin Consolidated Industries Ltd
1987 (3) SA 413
(W) 423A-D.
28
Pearl
Assurance Co Ltd v Government of the Union of SA
1934 AD 560
(PC) 563;
Willis Faber Enthoven (Pty) Ltd v Receiver
of Revenue
[1991] ZASCA 163
;
1992 (4) SA 202
(A) 220D-G.
29
Kommissaris
van Binnelandse Inkomste v Willers
1994 (3) SA 283
(A) 332H-I.
30
Lord
Scarman in
Gillick v West Norfolk & Wisbeck Area Health
Authority
[1985] UKHL 7
;
[1986] 1 AC 112.
31
Mc
Hugh J in
Perre v Apand Pty Ltd
[1999] HCA 36
;
(1999) 198 CLR 180
at 216.
32
SA
Permanent Building Society v Messenger of the Court, Pretoria
1996 (1) SA 401
(T) 403C-D.
33
Carmichele
v Minister of Safety and Security
[2001] ZACC 22
;
2001 (4) SA 938
(CC) para 36.
34
Commissioner
for Inland Revenue v Isaacs NO
1960 (1) SA 126
(A) 132H-135A.
35
Naylor
v Jansen; Jansen v Naylor
[2005] 4 All SA 26
(SCA) para 29.