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[2006] ZASCA 79
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Hassan and Another v Berrange NO (170/05) [2006] ZASCA 79; 2012 (6) SA 329 (SCA) (31 May 2006)
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THE
SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Reportable
CASE NO 170/2005
In
the matter between
DATOâ SAMSUDIN BIN ABU HASSAN First Appellant
DATIN
MELLENEY VENESSA SAMSUDIN Second Appellant
and
P DE VILLIERS BERRANGE NO Respondent
Coram: Mpati DP, Zulman, Farlam, Lewis JJA and Maya AJA
Heard: 16 May 2006
Delivered: 31
May 2006
Summary
:
Liquidated debt in
terms of s 9(1), Acts of Insolvency in terms of ss 8(a) and 8(d) read
with
s 12(1)
of the
Insolvency Act 24 of 1936
and the requirements of
service of an application for a provisional sequestration order and
matters to be disclosed therein.
Neutral citation: This judgment may be referred to as
Samsudin v De Villiers Berrange NO [2006] SCA 79 (RSA)
___________________________________________________________
JUDGMENT
___________________________________________________________
ZULMAN JA
[1] This appeal is against the grant of a
final order of sequestration by the Pietermaritzburg High Court
against the joint estate
of the appellants.
1
The essential issue for determination is whether the respondent
established on a balance of probabilities the requirements of s 12(1)
of the Insolvency Act 24 of 1936 (the
Insolvency Act) and
was
therefore entitled to the final order. The appellants have also
raised a number of ancillary issues for determination.
[2] On 17 December 2003 the respondent in
his capacity as provisional liquidator of NRB Holdings Limited (in
provisional liquidation)
(NRBH) launched successful ex parte
sequestration proceedings against the appellants for a provisional
order of sequestration. The
respondent was appointed provisional
trustee in the estate of the appellants on 18 December 2003. On
10 March 2004 the
second appellant, who it is now common
cause is married in community of property to the first appellant,
brought a reconsideration
application in terms of
rule 6(12)(c)
of
the Rules of Court upon the basis that the provisional sequestration
order was granted in her absence in an urgent application.
On 4 June
2004 the first appellant launched a similar reconsideration
application in regard to the provisional sequestration order.
Judgment was delivered by Levinsohn J on 18 January 2004 in terms of
which, inter alia, both reconsideration applications were dismissed
and the provisional sequestration order confirmed.
[3] The following factual findings are
either common cause or at least not disputed. Most of these facts
emanate from the affidavits
of the first appellant himself. During
1998 New Republic Bank Limited (New Republic Bank) advanced an amount
of R32 658 649,35
to NRBH to enable NRBH to acquire shares
in Mitrajaya Holdings Berhad (MITRAJAYA), a public company listed on
the Malaysian stock
exchange. By June 1998 NRBH had acquired
14 000 000 ordinary shares and 6 666 666 warrants
in MITRAJAYA. The
acquisition was funded from the proceeds of the
aforementioned loan. The shares and warrants were registered in the
name of OSK
Nominees (Asing) Sdn Bhd (OSK), which is a firm of stock
brokers in Malaysia. On 5 February 1999 Mr Jonathan Scott, the chief
executive
officer of New Republic Bank, addressed a letter to the
first appellant recording a discussion in regard to the disposal of
NRBHâs
assets and in particular the investment in MITRAJAYA. In
that letter Scott annexed a document from the South African Reserve
Bank
dated 16 February 1998 and drew the first appellantâs
attention pertinently to its contents. Scott furthermore recorded
that the
MITRAJAYA investment had a market value of between R50
million and R60 million. He recommended the realisation of the
investment
through the market and stated that the realisation of the
investment would assist NRBH to settle its interâcompany loan to
New
Republic Bank.
[4] In the draft financial statements of
NRBH for the year ending 31 March 1999 the MITRAJAYA shares and
warrants were valued at R55
million. As at 5 June 2000 the
aforementioned valuation was approved by the board of NRBH. The
shares and warrants closed on that
date on the Malaysian stock
exchange at RM3,84 (Malaysian Ringgits) and RM2,20 respectively. At
these prices the investment in MITRAJAYA
was recorded as having a
market value of R124,9 million. During June 2000 the first appellant
engaged in negotiations with L & M
Group Investments
Limited (L & M) to take over the MITRAJAYA shares. For the
purposes of the negotiations the MITRAJAYA shares
were valued at RM5
per share. On 18 April 2002 the first appellant procured a resolution
from the board of directors of NRBH in terms
of which the board
authorised any two of the directors to give instructions orally or in
writing to OSK regarding the sale of securities.
[5] On 25 July 2002 NRBH addressed a letter
to OSK. The letter was signed by Mr Neville Egan, a director of NRBH,
and the first appellant
authorising OSK to execute a âmarried dealâ
between NRBH and Khidmas Capital (KHIDMAS) of 22 400 000
MITRAJAYA shares
at RM1,15 per share. In the letter OSK Securities
were instructed to credit the nett proceeds of the sale âto the
buyerâs trading
account number 056001036407195â as part-payment
for their purchase of the shares. 22 400 000 MITRAJAYA
shares were sold
on 29 July 2002 for RM25 720 960. This
appears from OSKâs statement of account issued to its ostensible
client NRBH of
Durban. The statement reflects a purchase price of
RM1,15 per share.
[6] The purchaser of the shares was
KHIDMAS. The first appellant is a director of KHIDMAS and holds
99 999 shares out of 100 000
issued shares in that company.
In its financial statements for the year ending 30 June 2003 KHIDMAS
recorded that it owned marketable
securities valued at RM17 388 000.
It noted that the aforesaid shares were pledged âto a financial
institution for a
revolving credit facility of RM20 000 000
granted to a director Dato Samsudin Bin Haji Abu Hassan [the first
appellant]â.
The financial statements also reflect that in the year
2002 âa director owed the company RM19,140,820â. In 2003 this
indebtedness
appears to have been discharged. The indebtedness in
question was the indebtedness of the first respondent to KHIDMAS. In
the first
appellantâs replying affidavit he states:
â
The treatment in the accounts of Khidmas Capital of
offsetting the value of the shares against the shareholdersâ loan
would then
be reversedâ.
[7] During 2002 KHIDMAS pledged 22 400 000
MITRAJAYA shares to Southern Bank Berhard (Southern Bank), a
Malaysian bank.
The pledge was as security for a loan of some
RM20 000 000 granted by Southern Bank to the first
appellant personally.
The first appellant utilised the proceeds of
the loan to purchase shares in a Malaysian company listed on the
Kuala Lumpur stock
exchange called Seacera Tiles (SEACERA). The
SEACERA shares were registered in the first appellantâs name.
[8] During the period 28 October 2002 to 28
October 2003, 9 500 000 MITRAJAYA shares were sold on the
Malaysian stock exchange.
In an affidavit attested to on 12 December
2003 one Lam Hor Seng, the financial controller of RC Nominees,
affirmed that these shares
were sold on the instruction of Southern
Bank who held them as a pledge. The proceeds of the sale would be
received by Southern Bank.
[9] On 14 May 2003 winding-up proceedings against NRBH
were instituted at the instance of the receivers of New Republic Bank
Limited
(the bank had been placed under receivership some time
earlier). On 25 September 2003 the first appellant deposed to an
affidavit
in opposition to the winding-up of NRBH. Notwithstanding
such opposition NRBH was placed under provisional winding-up on 14
November
2003 and the respondent was subsequently appointed as
provisional liquidator.
[10] On or about 28 November 2003 the respondent,
pursuant to ex parte proceedings in the High Court of Malaysia,
obtained an interim
injunction against the disposal of 22,400,000
shares in MITRAJAYA. A copy of the Malaysian proceedings was served
on the first appellant
on 1 December 2003. The first
appellant is a Malaysian citizen who immigrated to South Africa in
1994. In August 2002 he
returned to Malaysia. He again returned to
South Africa during the early part of December 2003 and departed for
Malaysia on 9 December 2003.
On 5 December 2003 the first
appellant applied to his bankers, Nedbank, Johannesburg to transfer
US$100 000 from his personal
account in South Africa to a
Malaysian bank. The intervening provisional sequestration order was
granted on 17 December 2003.
[11] Before deciding whether the respondent established
the requirements of
s 12(1)
of the
Insolvency Act it
is convenient
first to consider the points made by appellants on appeal to this
court in regard to the reconsideration applications,
as well as
certain ancillary issues raised by him (essentially points
in
limine
).
[12] The appellants contend that the provisional
sequestration order should not have been granted, regard being had to
the lack of
notice to him and the second appellant his wife, to
alleged material non-disclosures by the respondent, and to the fact
that there
were pending proceedings in Malaysia. A recent amendment
to the
Insolvency Act introduced
s 9(4)(A)(a)(iv).
The subsection
reads as follows:
â
When a petition is presented to the court, the
petitioner must furnish a copy of the petition -
â¦
(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 itâ
(the
emphasis is mine).
In his application for the provisional sequestration
order the respondent stated that the application was urgent and that
in all probability
the first appellant was disposing of assets which
are owned by the joint estate including readily transferable shares
in other companies
owned by the first appellant. This it was said
would prejudice the creditors of the joint estate. The respondent
then went on to
state:
â
If notice is given to him he will certainly do as he
did in the face of the liquidation of the Company. In these
circumstances, I
respectfully submit that this matter is urgent and
should be heard
ex parte
without notice to the Respondents.â
The respondent relied on the cumulative effect of a
number of factors in support of his application for a provisional
sequestration
order. These plainly made out a
prima facie
case
that the first appellant had been guilty of dishonest conduct in
relation to the MITRAJAYA shares. The evidence adduced showed
that
the first appellant had misappropriated the shares for his own
benefit resulting in NRBH suffering a very substantial loss running
into millions of rands. I will return to deal with this aspect of the
matter later in this judgment.
[13] In my view the court which granted the
ex parte
application for the provisional sequestration of the joint estate
(Gyanda J) was perfectly justified in the exercise of its judicial
discretion, regard being had to the above factors in dispensing with
notice to the first appellant (cf
Ex Parte Neethling
2
).
As pointed out by Levinsohn J the
ex parte
procedure linked to
a rule
nisi
is well entrenched in our High Court practice and
received the Constitutional Courtâs approval in
NDPP v Mohamed
NO
.
3
[14] As regards the alleged material non-disclosures, it
is plain from cases such as
Schlesinger v Schlesinger
4
that in an
ex parte
application all facts must be disclosed by
the applicant which might influence the court in coming to a decision
and a failure to
do so may be visited by a court subsequently setting
aside the
ex parte
order. (See also
Phillips v National
Director of Public Prosecutions
.
5
)
The first appellant contends that there are four matters which the
respondent should have disclosed to Gyanda J in his founding
affidavit.
[15] First, the resolution of the board of directors of
NRBH dated 18 April 2002, referred to above. The first appellant
contends
that had Gyanda J been apprised of this resolution it may
well have caused him to have some misgivings as to whether the order
could
be granted without notice. In my view Levinsohn J was correct
in rejecting this argument on the simple basis that the resolution
means no more than that the directors had resolved to change the
authorised signatory as far as the NRBH Corporate Account held with
OSK in Malaysia was concerned. I will return to consider this
resolution in more detail later in this judgment.
[16] Second, the letter addressed by NRBH to OSK dated
25 July 2002 which I have referred to in para 2.9 above. The letter
reads as
follows:
â
With reference to the above, we hereby irrevocably
authorise and instruct you to execute a married deal between us, NRB
HOLDINGS LIMITED
(âthe Sellerâ) and KHIDMAS CAPITAL SDN BHD (âthe
Buyerâs) of 22 400 000 MITRAJAYA HOLDINGS BHD ordinary
shares
(âthe sharesâ) at RM1.15 per share on 25-7-02. We hereby
irrevocably instruct you to credit the nett proceeds from the sale of
the shares to the Buyerâs trading account number 855460 and CDS
account number 056-001-036407195 as part payment for the purchase
of
the shares.
We hereby undertake to indemnify OSK Securities Bhd and
to keep OSK Securities Bhd fully indemnified from and against any
expense,
loss, damage or liability which OSK Securities Bhd may incur
as a consequence of acting pursuant to this instruction.
We agree to abide and be bound by the KLSE rules in
respect of this transaction.
Please acknowledge receipt by signing and returning the
duplicate copy of this letter.
Thank you.â
In his answering affidavit the first appellant treats
this letter as being a logical consequence of the resolution passed
on 18 April
2002. I again agree with Levinsohn J that if Gyanda
J had been apprised of this letter it would merely have reinforced
the respondentâs
contentions in his founding affidavit that a
misappropriation had taken place. The courtâs attention would have
been focused on
the statements set out in the letter that OSK were to
âcredit the nett proceeds on the sale of the shares to the Buyers
trading
account ⦠as part payment for their purchase of the sharesâ
and not to the owner of the shares, NRBH.
[17] Third, the Malaysian proceedings. The first
appellantâs complaint appears to be that Gyanda J should have been
told that in
the Malaysian proceedings it was envisaged that the
respondent would claim return of certain unsold MITRAJAYA shares as
well as an
account in respect of the shares already sold. It is
contended that this is inconsistent with the debt alleged in the
present case,
namely a debt based on a misappropriation of shares.
The respondent in his founding affidavit referred to the order issued
by the
Malaysian court. The order makes reference to the âwritâ.
It would have been apparent to Gyanda J that the proceedings in
Malaysia
were of an interim nature designed to freeze the dealing in
the MITRAJAYA shares. I do not believe that the court would have been
influenced by the form of relief claimed in the writ and I do not
believe that a more detailed disclosure was required in the
circumstances.
[18] Fourth, the failure to disclose the extent of the
first respondentâs assets in South Africa and their value. In his
founding
affidavit in the proceedings before Gyanda J the respondent
stated that in view of the urgency of the matter he was loth to place
a value on the assets of the appellants as the information that he
had been provided with at that date might not be accurate. He
submitted, however, that a provisional trustee would be in a better
position to provide the court with an assessment of the financial
position but that
prima facie
the liabilities of the
ârespondents of R49 million exceed their assets situated in South
Africaâ. In my view sufficient disclosure
was made at that stage.
There is no warrant for contending that there was a wilful or
negligent non-disclosure of information pertaining
to the value of
the first appellantâs assets. In the nature of things, this was
then not possible.
[19] Linked to the alleged non-disclosure of the
Malaysian proceedings, the contention by the first appellant is that
proceedings
in two countries, South Africa and Malaysia, should not
have been entertained, in other words the defence of
lis alibi
pendens
. This defence was correctly rejected by the court
a
quo
on the basis that the relief claimed in the respective
proceedings was different. The sequestration proceedings were brought
in terms
of a South African statute and one of the jurisdictional
facts was a liquidated claim. The parties in the Malaysian court were
different
from those cited in the sequestration proceedings and there
were South African debts in the sequestration proceedings which
played
no part in the Malaysian proceedings. In addition the
sequestration proceedings required an act of insolvency, a matter
which also
played no part in the Malaysian action. Fundamental to the
plea of
lis alibi pendens
is the requirement that the same
plaintiff has instituted action against the same defendant for the
same thing arising out of the
same cause (see for example
Wolff NO
v Solomon
,
6
Nestlé (South Africa) (Pty) Ltd v Mars Inc
7
and
National Sorghum Breweries Ltd (t/a Vivo African Breweries) v
International Liquor Distributors (Pty) Ltd
8
)
.
An order of sequestration is not an ordinary judgment of the court,
but is rather a species of arrest or execution, affecting not
only
the rights of the two litigants but also third parties, and involves
the distribution of the insolventâs property to various
creditors,
while restricting those creditorsâ ordinary remedies and imposing
disabilities on the insolvent (
Ex Parte B Z Stegmann
9
).
In any event a court has a discretion in an appropriate case, such as
this, in regard to concurrent winding-up orders in more than
one
territorial jurisdiction (
Sackstein NO v Proudfoot SA (Pty) Ltd
10
).
A foreign court order of sequestration against a debtor does not
preclude a creditor in this country from proceeding with an action
against the debtor in our courts (
Hymore Agencies Durban (Pty) Ltd
v GIN NIH Weaving Factory
11
).
[20] In argument before this court the first appellant
submitted that the entire sequestration application against the
appellants
was actuated by an ulterior purpose by the respondent,
namely to obtain a tactical advantage against the appellants by
âshackling
their ability to dispute the alleged claims of the
respondent against their estateâ. This contention was apparently
not raised
directly before the court
a quo
and is not dealt
with in the judgment of that court. Plainly the respondent was
entitled to pursue proceedings in Malaysia in regard
to a substantial
asset of the company. Indeed he was obliged in exercising his duties
as provisional liquidator to do so.
12
[21] Relying upon a passage in the judgment in
National
Director of Public Prosecutions v Basson
13
the first appellantâs counsel contended that the learned judge
a
quo
wrongly restricted his discretion not to set aside the
provisional sequestration order by taking into account the fact that
the respondent
was a representative litigant. Levinsohn J said the
following in his judgment in this regard:
â
Alternatively, if I am wrong and this document should
have been disclosed, I am of the opinion that having regard
to all
the facts and circumstances which have come to light in this
application
, and given that the applicant litigates in his
representative capacity as the liquidator of NRBH, I ought to
exercise a discretion
in favour of the applicant and not visit him
with any sanction on the basis of non-disclosureâ (the emphasis is
mine).
In my view this passage does not indicate that the court
a quo
fettered its discretion by relying solely on the fact
that the respondent was a representative litigant. Furthermore a
reading of
the passage in
Basson
(supra) referred to does not
support the broad proposition advanced by the appellantsâ counsel.
[22] In argument before this court the appellantsâ
counsel drew attention to the fact that the respondent was not only
the applicant
in the sequestration proceedings in his capacity as
provisional liquidator of NRBH but also subsequently accepted an
appointment
as a provisional co-trustee in the estate of the
appellants. It was contended that this âclearlyâ demonstrated
that the respondent
was motivated only by the objective of satisfying
the alleged liabilities of the appellants to the respondent and not
by any concern
for the interest of the concursus. In addition it was
contended that from âany ethical and/or legal considerations, such
acceptance
of a position as co-trustee was manifestly oppressive to
the appellants.â I cannot agree with these submissions. As I have
already
stated the respondent was entitled and obliged to pursue
claims against the first appellant which the company had and this was
clearly
in the interests of the concursus. A complaint was made to
the Master who rejected it. The matter was taken no further.
[23] In argument before this court (again a matter not
raised before the court
a quo
) it was contended by the
appellantsâ counsel that the transcript of certain interrogation
proceedings held under ss 417 and 418
of the Companies Act 61 of 1973
(the Companies Act) as well as correspondence, company documents,
memoranda and such like emanating
from third parties not party to the
litigation, were inadmissible. The only evidence relied upon by the
court
a quo
emanating from the interrogation proceedings was
certain evidence that Egan gave. However, Egan in an affidavit in the
present proceedings
confirmed what he had stated in the interrogation
proceedings. Furthermore the various other matters objected to by the
appellants
were not in dispute. All that the appellants sought to do
was to dispute the inferences to be drawn from such documentation,
for
example the resolution of 18 April 2002 which I have
referred to above.
[24] I now turn to consider the essential issue relating
to the provisions of s 12(1) read with
sections 9(1)
,
8
(a) and
8
(d)
of the
Insolvency Act. The
section provides as follows:
â
(1) If at the hearing pursuant to the aforesaid rule
nisi
the court is satisfied that â
the petitioning creditor has established against the
debtor a claim such as is mentioned in subsection (1) of section
nine;
and
the debtor has committed an act of insolvency or is
insolvent; and
there is reason to believe that it will be to the
advantage of creditors of the debtor if his estate is
sequestrated,
it may sequestrate the estate of the debtor.â
Section 9(1)
of the
Insolvency Act, in
so far as is
relevant to this matter, provides that a creditor who has a liquid
claim for not less than R50 against a debtor who
has committed an act
of insolvency or is insolvent may petition the court for the
sequestration of the estate of the debtor. It is
not disputed that it
will be to the advantage of creditors of the joint estate if the
estate is sequestrated.
[25] The respondent sought the sequestration of the
joint estate of the appellants on the basis that NRBH had a
liquidated claim of
considerably more than R50 against the first
appellant. The liquidated claim was said to fall under two headings.
First an amount
equal to the value of the MITRAJAYA shares being the
sum of 25,7 million Malaysian Ringgits equivalent to R43,7 million,
it being
alleged that the first appellant misappropriated the shares.
Second, the sum of R7,337,020,75 which the respondent described in
his
founding affidavit as money appropriated by the first appellant
from the companyâs bank account without authority, and not for
the
companyâs business, and without giving consideration to paying an
undisputed liability of R32,6 million due to New Republic
Bank
Limited. This amount of R7,337,020,75 was made up as to R2 000 000
paid to a firm of attorneys in respect of legal
fees arising from an
arbitration, R523 930,46 to the first appellant personally on 12
October 2002 and R1 813 090,29
to a company called Buildmax
Industries (Pty) Limited during 2003. It was alleged that the
payments aforementioned were unauthorised
loans in terms of s 226 of
the Companies Act and that the first appellant was liable to
indemnify the company for any loss that it
sustained resulting from
the invalidity of the said loans. The respondent averred that the
first appellant was liable to indemnify
NRBH in terms of s 226 of the
Companies Act in the sum of R3,8 million.
[26] Regarding the issue concerning the MITRAJAYA shares
the first appellant states as follows: During 1998 he proposed to the
board
of NRBH that NRBH make an investment in Malaysia by acquiring
the MITRAJAYA shares. He was of the view that an investment of this
nature had the potential for making good returns. Thereafter NRBH
acquired 14 000 000 shares and 6 666 666 warrants
in MITRAJAYA. New Republic Bank lent some R32 000 000 to
NRBH to fund the acquisition. Bonus issues in the year 2000 increased
the number of shares held by NRBH to approximately 22 400 000.
This was 18,54 per cent of the issued and paid up shares
in
MITRAJAYA. The shares did not realise the potential that the first
appellant believed they would. In 1994 NRBH attempted to dispose
of
these shares but was unsuccessful as it was unable to find a buyer
for the entire block of shares. The first appellant states
that to
the best of his recollection, in the years 2001 and 2002 he had
informal discussions with the directors of NRBH on the best
way for
NRBH to deal with the shares in question given that it was unable to
find a purchaser for the entire block. One such director
was a Mr
Habib who encouraged the first appellant to take over the shares so
that a profit could be made by NRBH. According to the
first
appellant, after further discussions with members of NRBHâs board,
it was proposed that he be responsible for dealing with,
and
managing, the disposal of the MITRAJAYA shares in Malaysia with a
view to realising their value at the time and possibly making
a
profit in addition. According to him if there were to be any profits,
these would be divided equally between NRBH and the first
appellant.
He states that he had to guarantee a minimum return to NRBH which
would be equivalent to its liability to New Republic
Bank Limited in
respect of the loan taken to purchase the shares. He then goes on to
state:
â
It was also envisaged that this venture would be
undertaken through one of my companies in Malaysia as this would
facilitate the obtaining
of credit facilities and any dealings with
relevant authorities in Malaysia. To this end I used Khidmas Berhad
as the vehicle to
achieve the end aforesaid.â
[27] The first appellant avers that in the first half of
2000 the board of directors of NRBH agreed that he would be
authorised to
manage and deal with the MITRAJAYA shares with a view
to realising their value and obtaining a profit, and in addition that
he was
to guarantee NRBH a minimum return equivalent to its liability
to New Republic Bank. He would also be given a reasonable time to
achieve this venture which was, according to him, to be the end of
2004. The first appellant relies upon a resolution to the board
of
directors which he says authorised him to deal with the shares in the
aforesaid manner. I have previously referred to this resolution
which
is dated 18 April 2002. The resolution is crucial to the first
appellantâs defence to the respondentâs contention that
the first
appellant misappropriated the MITRAJAYA shares without authority. The
body of the resolution reads as follows:
â
At a meeting of the Directors held on 18
th
April 2002 it was resolved that:-
there is a change in authorised signatories for NRB
Holdings Limited Corporate Trading Account maintained with OSK
Securities Sdn.
Berhad and CDS Account maintained with OSK Nominees
(A) Sdn. Bhd. Any two of the Directors, namely, Datoâ A H Samsudin,
Jonathan
G Scott, Haroon Habib and Neville B Egan are hereby
empowered and authorised to give orders or instructions orally or in
writing
to OSK on behalf of the company for the purchase or sale of
securities and shall have the authority to bind the company in all
transactions
with OSK with effect from 18 April 2002.â
[28] The first appellant emphasises that he did not
simply obtain a mandate to sell the MITRAJAYA shares. He says that
the shares
were not performing well and it was difficult to dispose
of the whole block of shares. The idea was that he would use the
shares
âwith a view to identifying and re-investing, preferably in
a different sector of industry, and to manage such re-investments to
achieve the agreed goalâ. He asserts that the decision of the board
of directors to which I have referred authorised him to deal
with the
shares on the basis set forth above. The first appellant then
describes how he carried out the venture. He obtained banking
facilities from Southern Bank and KHIDMAS and then pledged the
MITRAJAYA shares as security. The proceeds of the facility so
obtained
were used to purchase, in the first appellantâs name,
11 000 080 shares in SEACERA. This shareholding represented
20
per cent of the issued and paid-up share capital of SEACERA.
According to the first appellant the core business of SEACERA is the
manufacture, distribution and marketing of homogenous tiles and
biaxially oriented polypropylene film. The first appellant asserts
that the institution by the respondent of this litigation has
thwarted his efforts to make a profit from the sale of the SEACERA
shares. He states that he was in negotiations to sell those shares at
a handsome profit but is now unable to do so. The first appellant
then attempts to deal with the affidavit deposed to by him on
25 September 2003 in opposing the winding-up of NRBH which
reflects none of these alleged transactions. In that affidavit, he
had stated that NRBH was the owner of the MITRAJAYA shares. He
tries
to explain this statement as follows:-
â
The averment I made in my South African Affidavit was
in substance true; namely that NRBH was still the owner of the
investment. If
I had been allowed to carry out the venture as agreed,
NRBH would have been able to obtain the return of its original
investment
in MITRAJAYA plus profit. I believe that this is still
possible.â
[29] The first appellant denies that he had been in
breach of any trust or that he committed a fraud or wrongful act. He
acknowledges
that he could have expressed himself more clearly, but
claims that he was in a rush to catch a flight from Johannesburg to
Kuala
Lumpur and he did not scrutinise the affidavit and did not
think it was necessary to set out the complex agreement reached
between
himself and the board of NRBH. He therefore denies that he
misappropriated the MITRAJAYA shares.
[30] The respondent avers that the âmachinationsâ of
the first appellant in Malaysia in regard to the shares resulted in a
loss
to creditors of NRBH of some R43,7 million plus interest. He
states that even on the most charitable interpretation of what the
first
appellant had done in Malaysia it is clear that he had taken
the shares which belong to NRBH. These shares were capable of being
realised on the open market.
[31] It is plain that what the first appellant did,
instead of selling the shares on the open market, was to pledge them
to Southern
Bank to secure a credit facility for himself personally
and not for NRBH. He did this without the authority of the board of
directors
of NRBH. According to the respondent, from the point of
view of NRBH, this is âakin to an act of piracyâ. I agree. The
respondent
points out that from the records of NRBH there is no
evidence of an agreement reached with the other board members
authorising the
first appellant to manage and deal with the disposal
of the shares in the manner alleged by the first appellant. There is
no resolution
where directors or shareholders authorise the first
appellant to conduct himself as he alleges. The resolution of 18
April 2002 to
which the first appellant refers, as I have previously
said, is simply a resolution dealing with the change of authorised
signatories.
As pointed out by the respondent the resolution, in any
event, was not signed by all the directors of NRBH. In the course of
making
his investigations the respondent had discussions with two of
the directors of NRBH, Habib and Scott. Both denied that the first
appellant was entitled to âtake over the sharesâ. Nor did they
authorise the first appellant to dispose of the shares in his
own
name or in the name of KHIDMAS. Furthermore the directors of NRBH
would not have had the power in law to dispose of what was
the whole
undertaking of NRBH in the absence of a resolution in terms of s 228
of the Companies Act. As at 30 April 2002
NRBHâs
liability to New Republic Bank was R87,7 million. The first
appellant, by misappropriating the MITRAJAYA shares, reduced
his
liability to KHIDMAS by RM19,1 million, secured an obligation by
KHIDMAS to pay his companies RM3,8 million and was able to borrow
in
his personal capacity as a result of the pledge of the shares. All
this enabled him to personally acquire the SEACERA shares in
his own
name. At no stage did he have written permission from NRBH, the true
owners of the shares, to do this. The respondent refers
to a letter
which the first appellant wrote to attorneys during June 2000, in
relation to an attempt to sell the shares to L &
M. In the letter
enclosing the proposed acquisition announcement it was clearly stated
that the disposal of the shares would require
both the approval of
the shareholders of NRBH at an extraordinary general meeting and also
the permission of the South African Exchange
Control authorities.
When the first appellant dealt with the shares in 2002 he had not
obtained any resolution either from the directors
or the shareholders
and had also not obtained the approval of the South African Exchange
Control authorities.
[32] It is well to bear in mind the following
remarks of Corbett JA in the oft-quoted case of
Plascon-Evans
Paints Ltd v Van Riebeeck Paints (Pty) Ltd
:
14
â
It is correct that, where in proceedings on notice of
motion disputes of fact have arisen on the affidavits, a final order,
whether
it be an interdict or some other form of relief, may be
granted if those facts averred in the applicantâs affidavits which
have
been admitted by the respondent, together with the facts alleged
by the respondent, justify such an order. The power of the Court
to
give such final relief on the papers before it is, however, not
confined to such a situation. In certain instances the denial
by the
respondent of a fact alleged by the applicant may not be such as to
raise a real, genuine or
bona fide
dispute of fact ⦠where
the allegations or denials of the respondent are so far-fetched or
clearly untenable that the Court is
justified in rejecting them
merely on the papers â¦â.
In this case no attempt was made by the first appellant
to âavail himself of his right to applyâ in terms of Rule 6(5)(g)
for
cross examination of the respondent or to seek to adduce oral
evidence to deal with the disputes of fact which had arisen on the
papers.
[33] One of the essential disputes was of course whether
or not the first appellant could lawfully deal with the MITRAJAYA
shares.
This issue was succinctly and correctly dealt with by the
learned judge
a quo
in these terms:
â
The first respondentâs version in a nutshell is
that he engaged in a âjoint ventureâ with NRBH to unlock the
latterâs investment
in these shares. He was given a mandate to deal
with these shares in Malaysia with a view to realising the investment
therein and
also making a substantial profit which he would share. He
holds out that he had the consent of the directors. The first
respondent
is at pains to proclaim in his various affidavits that he
is an international businessman of high repute and is well-versed in
the
ways of corporate governance. I am compelled to think that the
first respondent knew that NRBH could not simply dispose of the
Mitrajaya
shares. He certainly knew that both shareholdersâ and
Reserve Bank approval was required for this. He indeed made this
clear during
the L & H negotiations. When the first respondent
dealt with the shares after July 2002 he knew that no such
shareholders or
Reserve Bank approval had been obtained. That
shareholdersâ approval is a basic requirement admits of no doubt.
â¦â
[34] Section 228 of the Companies Act requires, in
essence, the approval of a resolution of a general meeting of the
company to dispose
of the whole or substantially the whole of the
undertaking of the company. It is common cause, as I have already
stated, that no
such resolution was passed by the shareholders of
NRBH to dispose of what at that stage were substantially the whole of
NRBHâs
undertaking, and no resolution was placed before the board
of directors of NRBH for their approval. As regards the resolution of
18 April 2002 to which I have repeatedly previously referred,
Levinsohn J stated:
â
It is in my opinion idle to contend that the April
2002 resolution referred to above can somehow be construed as
directorsâ consent
to the first respondent dealing with the
Mitrajaya shares. The applicant states that when he and Egan signed
the July letter authorising
stock brokers to sell the shares in a
âmarried dealâ, he, Egan, knew that this was a simulated
transaction ⦠No disclosure
whatsoever was made to the company
through its board of directors to the effect that there was this
scheme devised by the first respondent
to take the shares into the
name of a company under his control in Malaysia, wipe out his
indebtedness to that company - which presumably
means that there
would be a set-off; the company would pay for the shares by means of
this set-off. Furthermore the first respondent
would in his personal
capacity borrow RM19 million from Southern Bank and he in turn would
cause his company to pledge the shares
to that bank â¦â
.
After a careful analysis of the first appellantâs
affidavits the court
a quo
concluded that the respondent had
proved on a balance of probabilities that the first appellant had
perpetrated a theft of the MITRAJAYA
shares. The learned judge
a
quo
stated:
â
It is simply not possible to accept that what the
first respondent did was lawful
vis â a â vis
NRBH. In my
view the cumulative effect of all the aforegoing leads to the most
probable inference that the first respondent knew
that he had taken
these shares unlawfully out of the control of NRBH and had dealt with
them for his own account. This is reinforced
by his untruthful
assertions made in the answering affidavits deposed to in the
winding-up proceedings. In my view the first respondent
is a very
experienced financier and businessman who could not have honestly
believed that the company had consented or agreed to
his actions.
This despite his reliance on Eganâs conduct which he claims
signifies consent by the company. All the background facts
which I
have set forth above commencing with the requirement of Reserve Bank
approval and culminating with obtaining a s 228 resolution
demonstrated that these surreptitious actions by the first respondent
are to be branded as a blatant misappropriation of NRBHâs
assets.
There can be no doubt, even assuming (which is very doubtful) some of
the directors of NRBH were aware of, and consented
to the first
respondentâs machinations with the shares, and that the company
itself did not and could not consent to this conduct.
See S
v
Kritzinger
1971 (2) SA 57
AD. â¦â
I can find no fault with this analysis and agree fully
with the conclusion.
[35] The misappropriation of the MITRAJAYA shares gave
rise to a delictual claim for damages. In
Kleynhans v Van der
Westhuizen NO
15
it was held that a liquidated claim in terms of
s 9(1)
of the
Insolvency Act means
a claim where the amount is fixed either by
agreement or by an order of court or otherwise. What the legislature
intended was that
there should be certainty in connection with the
amount of the claim which was not affected by the legal basis and
nature thereof.
In the instant case the shares in question are
marketable securities which at the relevant date traded freely on the
Kuala Lumpur
Stock Exchange. Their market value was accordingly
readily available on any given day and it could easily be determined
at any given
time. There is evidence on the papers regarding the
price of the shares on the Kuala Lumpur exchange on 25 July 2002
and
daily valuations of the MITRAJAYA shares from 1 January 2002 to
30 July 2002 are set forth. The first appellant in his replying
affidavit
acknowledged and accepted the correctness of the
information. According to this the shares as at 25 July 2002
traded on
the Kuala Lumpur stock exchange at a closing price of
RM1.11. The shares were accordingly worth RM24 864 000. As
a consequence
of the misappropriation of the 22 400 000
shares the first appellant was indebted to NRBH in an amount of
RM24 864 000.
At a conversion rate of RM1 to R1.7 this
equates to R42 268 000, an amount well in excess of the R50
set out in
s 9(1)
of the
Insolvency Act. This
being so it is
unnecessary to go into the question of whether the respondent
established the other debts relied upon.
[36] The respondent relies on the two acts of insolvency
set out in subsections 8(a) and 8(d) of the
Insolvency Act. In
addition to the aforegoing the allegation was made by the respondent
that the first appellant was in fact insolvent given that his
liabilities exceeded the value of his assets.
[37] Both subsections 8(a) and 8(d), in setting out acts
of insolvency, refer to an intent on the part of the debtor. In the
case
of
section 8(a)
the intent is one to evade or delay the payment
of debts, while in
section 8(d)
the intent on the part of the debtor
is to prejudice his creditors or to prefer one creditor above
another. The test of intention
on the part of the debtor is a
subjective one (cf
De Villiers NO v Maursen Properties (Pty)
Ltd
16
).
Intention is established by a process of inferential reasoning and is
not dependent upon the mere
ipse dixit
of the debtor who may
well deny that he has any such intention. A court, in considering
whether there was such an intention is required
to weigh up all the
relevant facts and circumstances in order to determine what, on the
probabilities, was the âdominant, operative
or effectual intention
in substance and in truthâ of the debtor.
17
[38]
Section 8(a)
provides that a debtor commits an act
of insolvency â
â
if he leaves the Republic or being out of the
Republic remains absent therefrom, or departs from his dwelling or
otherwise absents
himself, with intent by so doing to evade or delay
the payment of his debts;â
In support of the inference that the first appellant had
the requisite intent in terms of
s 8(a)
the respondent relies upon
the cumulative effect of what is described as seven factors. These
are:
(a) The first respondent initially returned to Malaysia
and had previously stated that he was âbringing back his skills,
expertise
and capitalâ.
(b) He had adopted a systematic approach of denuding
NRBH of its assets and had in fact appropriated the MITRAJAYA shares
as his
own and all the cash in the company for his own benefit.
(c) He had refused to pay the undisputed debt owed by
NRBH to New Republic Bank.
(d) In his affidavit opposing the winding-up of NRBH he
had stated that NRBH was the owner of the MITRAJAYA shares when in
truth
and in fact the ownership of these shares had been transferred
to KHIDMAS, of which he was a director owning 99 per cent of the
issued
share capital. KHIDMAS had in turn disposed of some of these
shares in the open market and the remainder were pledged to the
Southern
Bank.
(e) The first appellant acted unlawfully when he
disposed of the MITRAJAYA shares because these shares could not be
disposed of without
the permission of the South African Reserve Bank,
which had not been sought.
(f) In the first two weeks of December 2003 the first
appellant removed certain documentation belonging to the company in
provisional
winding-up without the consent of the respondent in
breach of
s 142(1)
of the
Insolvency Act read
with s 425 of the
Companies Act.
(g) The first appellant also removed R35 million which
he indirectly received from the settlement of an arbitration
involving Mawenzi
Resources. It was alleged that he ought to have
paid the groupâs liabilities, more particularly the undisputed
indebtedness of
R32,6 million due by NRBH to New Republic Bank
Limited.
[39] To these seven factors I would add the following.
The MITRAJAYA shares, as I have said, constituted the greater part of
the assets
of NRBH within the meaning of s 228 of the Companies Act.
I have already pointed out that no resolution was passed which
authorised
the disposal of the shares; none of the directors of NRBH
authorised the specific sale of these shares to KHIDMAS; the first
appellant
was fully aware of the fact that he had no right to dispose
of the shares and moreover that he required the authority of the
South
African Reserve Bank to do so; and he was aware also of the
various prices at which the MITRAJAYA shares were sold between 28
October
2002 and 28 October 2003, the total amount thereof converted
to South African rands being R15 357 827.65. It is thus
apparent
from all appellantâs conduct referred to above that it was
the first appellantâs intention to conceal evidence of his
dishonest
dealings with the assets of NRBH.
[40] The first appellant states that as he had invested
such a large amount in South Africa it is inappropriate and false to
suggest
that he intended to evade the payment of his debts. He
contends that the existence of substantial assets which he has in
South Africa
belies the allegation that he intended to leave the
Republic of South Africa to avoid paying his debts. However, in the
light of
the cumulative effect of all of the above facts, and despite
the first appellantâs denial, I believe that it may well have been
his dominant intention, when he first left South Africa for Malaysia
in 2002 and returned to South African in early December 2003,
departing again on 9 December 2003 after only a few days in South
Africa and after taking documents of NRBH, without the respondentâs
knowledge or consent, to âevade or delay the payment of his debtsâ
within the meaning of s 8(a). It is not necessary to make
a finding
in this respect, however, given my conclusion that the first
appellant committed the act of insolvency set forth in s 8(d).
[41] Section 8(d) provides that a debtor commits an act
of insolvency â
â
if he removes or attempts to remove any of his
property with intent to prejudice his creditors or to prefer one
creditor above another.â
The respondent states that he only became aware of the
commission of this act of insolvency after he had launched these
proceedings.
It is clear from cases such as
Schlemmer v Mehnert
18
and
Joosub v Soomar
19
that an applicant for sequestration is entitled to rely on the
commission of an act of insolvency albeit that he only became aware
of it after the commencement of the sequestration proceedings. The
respondent says that after the grant of the provisional sequestration
order he discovered that the first appellant was in the process of
seeking to transfer US$100 000 from his personal Nedbank
account
in South Africa to Malaysia. The respondent alleges that this was the
first appellantâs only remaining easily transferable
asset in South
Africa. The first appellant applied to his bankers on 5 December 2003
to transfer the money. However, the intervening
provisional order of
sequestration prevented the carrying out of this instruction.
[42] The first appellant admits that he gave the
instruction in question. He says the following in his reconsideration
application:
â
As I have explained at some length above the
applicant had commenced litigation in Malaysia and I was required to
deal with such litigation
by instructing solicitors in Malaysia. This
obviously put a strain on my finances and it became necessary for me
to collate funds
which I had in South Africa for the purpose of
meeting my expenses in Malaysia. In transferring the sum of
US$100 000 I was
simply collating available funds to meet my
expenses which I envisaged incurring in Malaysia. The funds were not
taken out of the
country for the purposes of evading payment of any
debt. Indeed when one considers the overall investment I made within
South Africa
US$100 000 is but a small portion of that
investment â¦â
.
However, in a letter dated 5 December 2003 written by
the first appellant to his bankers he stated:-
â
4.A. The main reason for the repatriation [of the
US$100,000-00] is for the partial repayment of advances from my
investment remittance
from and during the period February, June and
July 1996 from Kuala Lumpur, Malaysia.
â¦
.
B. The total remittances are as follows:-
DATE AMOUNTS (US$)
(i) 4 February, 1996 2,700,000-00
(ii) 17 June, 1996 2,400,960-38
(iii) 12 July, 1996
1,250,000-00
TOTAL US$
6,350,960-38â
He made no mention of âmeeting his expensesâ in
Malaysia to deal with litigation in Malaysia. According to the first
appellantâs
bank statement as at 1 April 2004 there was a credit
balance of R998 844,87, the transfer of US$ 100 000
having not
taken place.
[43] I agree with the court
a quo
that the first
appellantâs conduct in attempting to remove these funds must be
seen against the full factual background set out
above. It is
important in this regard to note that the first appellant must have
known that he had incurred a very substantial debt
to NRBH. At the
end of November 2003 he was confronted by the liquidator of NRBH, and
Malaysian proceedings were instituted. The
first appellant admits
that he needed funds to pursue his defence to the Malaysian claims
which were essentially and fundamentally
based on the
misappropriation of the MITRAJAYA shares. I regard these attempts as
futile and designed to delay the enforcement of
payment by the
respondent in South Africa of the large amount owed by him.
[44] In dealing with s 8(d), after stating that the test
of intention is subjective Mars
20
states that:
â
It is difficult, however, to see how, without in
effect making a disposition, a debtor can remove his property with
the intention
to prefer a creditor, but a removal with intent to
prejudice creditors can easily be imagined and may be illustrated by
the case,
by no means rare in practice, of a debtor sending money or
goods to a foreign country so as not to be available for settlement
of
his creditorsâ claims.â
[45] Meskin
21
in dealing with s 8(d) states:
â
It is submitted that the word âremovesâ and the
word âremoveâ have their ordinary meanings and affect the meaning
to be assigned,
in this context, to the word âpropertyâ. By the
use of the latter word it is submitted, the intention is to refer
only to corporeal
movables, ie, property capable of being moved
physically from one place to another. The intention is to hit a
debtorâs physical
moving or attempted moving of any of his
corporeal movables from one place to another (whether or not such
moving constitutes also
a disposition (as defined in
section 2
of the
Insolvency Act) which
occurs with the requisite intent. To speak of a
âremovableâ in the context of immovable property or of an
incorporeal right is,
it is submitted, giving language its ordinary
meaning, notionally unsound.â
The learned author refers for these propositions to
S
v Levitt
22
and the reported judgment of the court
a quo
23
and to the definition of âpropertyâ in
section 2
of the
Insolvency Act. This
definition defines property as meaning âmovable
or immovable property wherever situate within the Republic, â¦â.
It is not necessary
to decide in this case whether the learned author
is correct in restricting the meaning of the word âpropertyâ in
section 8(d)
to corporeal property. This is so since the transfer of
a balance owing to a debtor by his bank to another bank would be
tantamount
to a transfer of actual money, a corporeal, represented by
the credit, as was the situation in the present matter. In the
context
of theft of money represented by a credit our courts have
accepted that a misappropriation thereof can constitute or amount to
theft
because such misappropriation is the equivalent of the
appropriation of the actual corporeal money.
24
[46] In my view, proper regard being had not only to all
the facts set out above concerning
s 8(d)
specifically, but also to
all of the other facts referred to above, including those relating to
the misappropriation of the MITRAJAYA
shares and those specifically
mentioned in regard to
s 8(a)
the inescapable inference is that the
first appellantâs attempt to transfer US$100 000 from South
Africa to Malaysia, without
the knowledge and consent of the
respondent, was made with the intent to prejudice his South African
creditors, in particular NRBH
or at least to prefer one creditor
above another.
[47] In summary therefore I am satisfied that the
respondent:
(a) Established a claim as referred to in
s 9(1)
, and
(b) the first appellant committed an act of insolvency
in terms of
s 8(d)
, moreover, there is reason to believe that it will
be to the advantage of creditors if the first appellant is finally
sequestrated.
[48] It is not necessary in the light of the aforegoing
to consider whether the respondent established general insolvency in
terms
of
s 9(1)
of the
Insolvency Act, a
matter in dispute on the
papers.
[49] The court
a quo
in all the circumstances
correctly exercised the wide discretion vested in it in terms of
s
12(1)
of the
Insolvency Act, to
grant a final order.
25
[50] The second appellant contends, first, that no basis
was set out in the founding papers to justify the failure of the
respondent
to give notice to her of the application for the
provisional sequestration order. Secondly, she argues that the
allegations concerning
the acts of insolvency relied upon by the
respondent in terms of
section 8(a)
and
8
(d) of the
Insolvency Act
have
not been established by the respondent. She too contends that
there was no proper disclosure of the Malaysian proceedings, and that
the court
a quo
incorrectly exercised the discretion that it
had to stay the determination of the application for a final
sequestration order: thus
the provisional order should not have been
confirmed.
[51] While initially denying that she was married to the
first appellant in community of property she now concedes, and it is
common
cause, that that it the case. Thus the provisions of the
recent amendment of the
Insolvency Act regarding
the furnishing of
notice of an application for a sequestration order which I have set
out above concerning notice to the first appellant
apply equally to
the second appellant. Given all the background facts it is not
inconceivable that if the second respondent had been
apprised of the
application, she might in concert with the first respondent have
taken necessary measures to move assets under her
control overseas. I
am satisfied, as was the court
a quo
, that Gyanda J, in
his discretion, correctly did not insist on service of the
application on the second appellant as such notice
would have
defeated the rights of creditors which were sought to be enforced in
the application. There was no evidence before Gyanda
J that the first
and second appellants were estranged and not living together as
husband and wife. This additional information was
before Levinsohn J
on the return day. The history of the rule relating to privilege in
respect of marital communications is conveniently
set out in
S v Johardien
26
where it is pointed out that by our common law spouses were
incompetent to give evidence against or for each other in any civil
or
criminal case. The rationale for the rule is said to be based on
public policy which recognises the intimacy of the relationship
between husband and wife. Against this background it would have been
absurd for Gyanda J to dispense with notice to the first appellant
and yet insist that that notice be given to his wife. The unreported
decision in
S Jerrier v P Jerrier
27
referred to by appellantsâ counsel is plainly distinguishable on
its own peculiar facts.
[52] I have dealt with all of the other matters
specifically raised by the second appellantâs counsel in argument
when considering
the position of the first appellant. Such
considerations apply equally to the arguments advanced on behalf of
the second appellant
by counsel for the first appellant who now,
(although not in the court
a quo
) represent both appellants.
[53] In all of the circumstances the appeal is dismissed
with costs, such costs to include costs occasioned by the employment
of two
counsel by the respondent.
---------------------------------------
R H ZULMAN
JUDGE OF APPEAL
CONCUR: ) MPATI DP
) FARLAM JA
) MAYA
AJA
C
H LEWIS
[54] I have had the benefit of reading the judgment of
my learned colleague Zulman and agree with the conclusion to which
he has
come. However, I take a different approach to the meaning of
âpropertyâ in
s 8(d)
of the
Insolvency Act 24 of 1936
. My
colleague Zulman does not find it necessary to determine whether the
term refers also to incorporeal property. In my view, it
does, and
the authors of
Meskin Insolvency Law and its operation in winding
up
28
are quite wrong in suggesting that the word âremovesâ in
s 8(d)
indicates that the property removed by the debtor is corporeal alone.
I accept that the word âremovesâ does in general relate
to the
moving of a physical, tangible object. But the word must be read in
the context of the section, having regard to its purpose.
[55]
In
S v Levitt
29
Wessels JA stated that âremovesâ in
s 132(d)
of the
Insolvency
Act meant
âconveying or shifting an asset to another place. . . .
It appears to be notionally impossible to remove an incorporeal
asset,
except possibly in the sense of removing the written
instrument evidencing the rights constituting the asset in the
estate.â Wessels
JA did qualify
this statement, however,
saying that the word âremovesâ should be interpreted in the
context of the section.
Section 132
deals with the offences committed
by an insolvent in destroying or concealing books or assets. The
section is clearly confined to
the concealment or destruction of
books of record or corporeal assets.
[56] The words âpropertyâ and âremovesâ in
s
8(d)
must similarly be interpreted by having regard to the section
and its purpose. The subsection provides that a debtor commits an act
of insolvency âif he removes or attempts to remove any of his
property with intent to prejudice his creditors or to prefer one
creditor above anotherâ. It seems to me that what the section aims
to prevent is an act by which the debtor puts beyond the reach
of his
or her creditors
any
asset in his or her estate, depriving
them of the benefit of the proceeds. It is highly unlikely that the
legislature would have
intended that corporeal property be treated
differently from incorporeal property in this respect. Why, for
example, distinguish
between shares in a company, which are
incorporeal, and jewellery or motor cars which are corporeal? It is
trite that the word âpropertyâ
in general refers to both
corporeals and incorporeals.
30
There can be no reason to restrict its meaning in this provision.
[57] Further, the subsection must be read with the other
provisions of
s 8.
Subsection 8(c), for example, provides that a
debtor commits an act of insolvency if he makes, or attempts to make,
âany disposition
of his propertyâ which has the effect of
prejudicing or preferring any creditor. âPropertyâ in this
subsection undoubtedly
refers to incorporeals. Thus if a debtor
donates shares to his or her children with the intention of
prejudicing creditors the act
will surely be treated in the same way
as if he or she donates furniture or any other asset to his or her
children.
[58] The definition of âremoveâ in the Concise
Oxford English Dictionary,
31
while giving as one meaning âtake off or away from the position
occupiedâ, which clearly connotes moving of a corporeal, attributes
another meaning too: âabolish or get rid ofâ. This certainly
covers the act of the first appellant in attempting to remit funds
to
Malaysia.
[59] For these reasons I consider that the word
âremovalâ in
s 8(d)
refers also to the transmission of funds
abroad, and that the first appellantâs attempt to remit money to
Malasia, done with the
intent to prejudice creditors, was an act of
insolvency. I thus concur with my colleague Zulman in finding that
the court below
correctly held that the requirements of
s 9
of the
Insolvency Act have
been met, and that the appeal should be dismissed
with costs including those occasioned by the use of two counsel.
C H Lewis
Judge of Appeal
1
The judgment is reported sub nomine
Ex Parte
De Villiers Berrange NO v Samsudin & Another
[2005] JOL
13692
(N).
2
1951 (4) SA 331
(A) 335D-E.
3
[2003] ZACC 4
;
2003 (5) BCLR 476
(CC).
4
1979 (4) SA 342 (W) 349.
5
2003 (6) SA 447
(SCA) 455 para 29.
6
(1898) 15 SC 297
at 306.
7
2001 (4) SA 542
(SCA) 548J-549A-B.
8
[2000] ZASCA 159
;
2001 (2) SA 232
(SCA) 240B-D.
9
1902 TS 40
at 47.
10
2003 (4) SA 348
(SCA) 357C-E.
11
1959 (1) SA 180
(N) 182G-183B.
12
Estate Logie v Priest
1926 AD 312
at 320.
13
2002 (1) SA 419
(SCA) 419A-B.
14
[1984] ZASCA 51
;
1984 (3) SA 623
(A) 634H-635C.
15
1970 (2) SA 742
(A) at 749E and 750A-B.
16
1983 (4) SA 670
(T) at 676A.
17
Cooper NNO v Merchant Trade Finance Limited
2000 (3) SA 1009
(SCA) para [10], Tomlin LJ in
Peat v Gresham
Trust Limited
[1934] AC 252
at 262 and
Gore NO v Shell South
Africa (Pty) Ltd
[2003] 4 All SA 370 (C) 376.
18
1908
25 SC 782.
19
1930 TPD 773
at 779.
20
The Law of Insolvency in South Africa
(8
ed) p 72 para 4.5.
21
Meskin Insolvency Law and Its Operation in Winding-up
para 2.1.2.4 pp 2-12/13.
22
1976 (3) SA 476
(A).
23
Supra [2005] JOL 13692 (N) 66-67.
24
See the discussion of the theft of money and
individual objects set out in
Lawsa
2 ed Vol 6 paras 299
to301 and the authorities there referred to and in particular the
full discussion by Professor M M Loubser
in his doctoral thesis,
The
Theft of Money in South African Law
(1978).
25
De Waard v Andrew and Thienhaus Limited
1907
TS 727
at 736,737 and
Metje & Ziegler Ltd v Carstens
1959
(4) SA 434
(SWA) 435A.
26
1990 (1) SA 1026
(C) at 1028F.
27
Case No A 31220/03 in the Natal Provincial
Division.
28
Looseleaf, updated 2005.
29
1
976 (3) SA 48
(A) at 48G-H. The authors of
Meskin
rely on this decision in concluding that âpropertyâ
in
s 8(d)
means corporeal property. Their reliance is misconceived
since they do not distinguish between the purposes of
s 8
and
s 132.
30
">
30
See P J Badenhorst, Juanita M Pienaar and Hanri
Mostert
Silberberg and Schoemanâs The Law of Property
5 ed
p1ff and C G van der Merwe âThingsâ in
The Law of South
Africa
vol 27 First re-issue paras 195 and 204.
31
10 ed 2002.