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[2013] ZAKZDHC 24
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Smith v National Urban Reconstruction and Housing Agency and Others (2831/2012) [2013] ZAKZDHC 24 (22 May 2013)
In the KwaZulu-Natal High
Court, Durban
Republic of South Africa
Case
No :2831/2012
In
the matter between :
Stephen
Patrick Smith
.......................................................................................
Applicant
and
National
Urban Reconstruction and Housing Agency
...........................
First
Respondent
Nurcha
Finance Company (Pty) Ltd
................................................
Second
Respondent
Nurcha
Equity Services (Pty) Ltd
.........................................................
Third
Respondent
Burt
Silverton-Laing NO
.....................................................................
Fourth
Respondent
Neil
David Button NO
.............................................................................
Fifth
Respondent
The
Master of the High Court
...............................................................
Sixth
Respondent
Judgment
Lopes J
[1] The applicant seeks
an order declaring void ab initio and of no force or effect a final
sequestration order granted against
his estate under case number
9845/2010. In addition he seeks an order restraining and interdicting
the respondents from conducting
any proceedings consequent upon the
final sequestration order.
[2] The first to third
respondents, to whom I shall collectively refer as ‘Nurcha’
obtained four default judgments against
the applicant. This was
pursuant to the applicant having bound himself as co-principal debtor
with, and surety for, various entities
to whom funds were advanced by
Nurcha. As their efforts to execute against the applicant’s
assets proved fruitless, in August
2010 Nurcha initiated
sequestration proceedings against the applicant. On the 20
th
September 2010 a provisional order was granted sequestrating the
estate of the applicant.
[3] Nurcha had great
difficulty in serving the provisional order of sequestration. They
served the order on three residential addresses,
and in addition,
hired a tracing agent who was unable to track down the applicant.On
the 18
th
October 2010 pursuant to Nurcha’s
unsuccessful attempts to serve the provisional order, an order for
the substituted service
of that order was made by Ntshangase J. Three
forms of service were set out in the substituted service order.There
having been
compliance with the substituted service order, and in the
absence of any appearance on behalf of the applicant, the provisional
order was made final on the 8
th
November 2010.
[4] Mr
Kemp
SC,
who appears on behalf of the applicant seeks to have the final
sequestration order to be declared null and void because the
applicant did not have served upon him a copy of the application
papers as required by s 9 (4A)(a)(iv) of the Insolvency Act, 1936
(‘the Act’).
[5] Mr
Kemp
made it clear that the applicant relied upon the
provisions of s 149(2) of the Act, and submitted that the applicant
was not required
to demonstrate the requisite ‘sufficient
cause’ as would be the case where a rescission order is sought.
He conceded
that the applicant had not set out facts which could
support a normal rescission of the judgment.
[6] Section 149(2) of the
Act provides :
‘
The
court may rescind or vary any order made by it under the provisions
of this Act.’
Mr
Kemp
submitted that there were certain instances where the
court could simply set aside an order, as set out in
Dada
v Dada
1977 (2) SA 287
(T). In
Dada
the court set out that where an action has been
instituted without due citation of the defendant, the subsequent
proceedings are
null and void, and any judgment given is of no force
or effect. The authorities cited by the court for that proposition
involved
litigants who were not served with notice of the proceedings
before they began. The judgment also stated that upon proof of
invalidity,
the decision can be disregarded,
without
the necessity of a formal order setting it aside.
[7] The circumstances of
the present case are, however, somewhat different. When the
proceedings were initiated, the applicant was
cited, but there was no
service upon the applicant. It has hitherto been the practice of this
court not to insist upon service
of the application papers where an
act of insolvency is relied upon or where there is other external
evidence of insolvency. The
service of the application papers leading
to the grant of the provisional order is in any event, however, of no
moment,
because, Mr
Kemp
made it clear in his argument that the applicant did not
intend to seek to set aside the provisional order, and the servicer
of
the provisional order was not an issue.
[8] Mr
Kemp
also
relied on
Vidavsky v Body Corporate of Sunhill Villas
2005 (5)
SA 200
(SCA). This case is authority for the proposition that where
there is no jurisdiction, the proceedings are a nullity without the
necessity of a formal order setting the proceedings aside. This case
related to arbitration proceedings which were conducted without
notice to the respondent. It records that the mere objection to an
arbitration award being made an order of court, did not require
an
application to set the award aside, where notice of the arbitration
hearing had not been given to the other party. This case
is also
distinguishable from the facts of the present matter.
[9] I was also referred
to
Tödt v Ipser
1993 (3) SA 577
(A) where the court set
out three cases in which, according to our common law authorities,
judgments are void. They are :
where there has been no
proper service;
where there is no proper
mandate; or
where the court lacks
jurisdiction.
[10] Mr
Mossop
,
who appeared for the respondents, referred me to
Storti v Nugent
and Others
2001 (3) SA 783
(W) a judgment of Gautschi AJ.The
learned Acting Judge carefully reviewed the decisions regarding
rescission and dealt in particular
with the provisions of s 149(2) of
the Act. He concluded that the principles to be gleaned by the
authorities, which he cautions
are often not harmonious, are the
following (806D – G):
The Court’s
discretionary power conferred by this section is not limited to
rescission on common-law grounds.
Unusual or special or
exceptional circumstances must exist to justify such relief.
The section cannot be
invoked to obtain a rehearing of the merits of the sequestration
proceedings.
Where it is alleged that
the order should not have been granted, the facts should at least
support a cause of action for a common-law
rescission;
Where reliance is placed
on supervening events, it should for some reason involve unnecessary
hardship to be confined to the ordinary
rehabilitation machinery, or
the circumstances should be very exceptional;
A Court will not
exercise its discretion in favour of such an application if
undesirable consequences would follow.
Mr
Kemp
submitted
that the judgment of Gautschi AJ was not intended to be
all-encompassing. In addition the common law rules set out
Vidavsky
above would entitle a court to set aside a judgment without any
evidence of ‘sufficient cause’.
[11] With regard to the
fact that this court should nevertheless ensure that the common-law
requirements are satisfied see
Naidoo and Another v Matlala and
Others NO
2012 (1) SA 143
(GNP) paras 4 and 5.
[12] Mr
Kemp
submitted that the provisions of s 9(4A)(a)(iv) of the Act are
peremptory. In this regard he relied upon
Ratilal v Dos Santos
1995 (4) SA 117
(W). In that case a provisional sequestration order
was refused in circumstances where the nulla bona return of service
relied
upon was only served on one of two spouses. This matter
pre-dated the introduction of s 9(4A), and the facts of that case are
distinguishable
from the present matter.
[13] Mr
Kemp
also
referred me to
Berrange NO v Hussan and Another
2009 (2) SA
339
(N) where Levinsohn J, after dealing with the previous practice
that service of the papers would not be required in certain
sequestration
proceedings (relying on a nulla bona return or clear
documentary evidence of indebtedness), stated at page 352 F –
353 F
‘
The
first respondent has directed an attack at the fact that the
applicant moved
ex
parte
and without notice for the relief he sought. Now the
ex
parte
procedure linked to a rule
nisi
is well entrenched in our High Court practice. Indeed it has also
received the Constitutional Court's approval in
National
Director of Public Prosecutions and Another v Mahomed NO and Others
[2003] ZACC 4
;
2003 (4) SA 1
(CC)
(2003 (1) SACR 561
;
2003 (5) BCLR 476).
Proceeding ex parte is
also well established in our insolvency practice. (See
Collective
Investments (Pty) Ltd v Brink and Another
1978 (2) SA 252
(N).)
Kriek J (as he then was) held that rule 6(2) of the Uniform Rules of
Court does not preclude the granting of interim relief
such as a
provisional winding-up order without proper notice to the respondent.
Rule 6(4) does not envisage only applications in
which no relief is
sought against any person: the phrase '
ex parte
' in rule 6(4)
contemplates the situation in which an application is brought without
notice to anyone, either because no relief
of a final nature is
sought against any person or because it is not necessary to give
notice to the respondent.
Per
Kriek J at 255G.
It must be said, however,
that the
Collective Investments
case, supra, was decided on
the footing that applications for the winding up of companies and the
sequestration of individuals
based on a
nulla bona
return or
clear documentary evidence of an indebtedness could be brought ex
parte without notice in terms of our practice. A recent
amendment to
the
Insolvency Act introduces
s 9(4A)(a)(iv)
(see
s 2
of the
Insolvency Second Amendment Act 69 of 2002
) which has brought about
an important change. The subsection reads as follows:
When a petition is
presented to the court, the petitioner must furnish a copy of the
petition:
. . .
(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 interests
of the debtor or the creditors to dispense with it.
Clearly, the legislature
intended that in all cases irrespective of the nature of the
creditors' claim against the debtor a copy
of the petition has to be
furnished to the debtor. The section does not use the term 'serve'
but rather uses the word 'furnish',
which is not a term of general
application in our civil practice and procedure. It would seem that
the legislature intended a form
of informal service. The dictionary
definition of 'furnish' is 'to provide, contribute, afford, supply,
yield' (
The Shorter Oxford English Dictionary
vol I at 820).
The furnishing to the
debtor of the petition may be dispensed with in cases where the court
is of the opinion that it is in the
interests of the creditor or the
debtor. In the first place, it seems to me that a creditor would
necessarily have to make out
a case in the founding affidavit to
dispense with the furnishing of the petition. Factors that could
properly be taken into account
include the urgency of the matter and
the conduct of the debtor in relation to his assets. In general the
court will weigh the
interests of the creditor and the debtor and,
more particularly the prejudice that may be suffered by such creditor
if he/she gives
notice and the application is heard in due course.
The factors that could be taken into account are not exhaustive. Each
case will
depend on its own particular circumstances.’
[14] In
Standard Bank
of SA Ltd v Sewpersadh and Another
2005 (4) SA 148
(C), Dlodlo J
referred to the use by the legislature of the word ‘must’
in s 9 of the Act and, contrasting it with
the word ‘may’
decided that service of the application, as set out in the section,
was compulsory and not permissive.
[15] In
Moodliar NO &
Others v Hendricks NO & Others
2011 (2) SA 199
(WCC) Davis J
dealt with whether a court had the inherent power to condone
non-compliance with s 346 (4A)(iv) of the Companies
Act 1973, which
is in similar terms to s 9(4A)(a)(iv) of the Act. At page 205 he
stated :
‘
[26]
In dealing with this question Meskin
Henochsberg
on the Companies Act
at
724(1) appears to be uncertain as to the position, as is evident from
the following passage:
'While sub – s
(4A)(a)(iv) specifically provides for the circumstances in which the
court may dispense with the delivery of
the application of the
company, no such provision applies in relation to the delivery of a
copy of the application to the persons
mentioned in sub-s (4A)(a)(i),
(ii), (iii) and non-compliance therewith
may
preclude the
grant of a provisional order until there has been compliance.' [My
emphasis.]
[27] Insistence that a
court cannot under any circumstances condone a deviation from strict
compliance may, to some extent, run
counter to the inherent
jurisdiction of the court. See in this connection Jerold Taitz
The
Inherent Jurisdiction of the Supreme Court
at 14 – 18 and
the authorities cited therein.
[28] But the answer may
well lie, not so much in the inherent jurisdiction of the court to
condone non-compliance, as in the nature
of the concept of compliance
itself. In this connection LC Steyn
Die Uitleg van Wette
5 ed at
201, in dealing with the question of compliance, says the following:
'Somtydsegter word ook in
hierdie verband slegs sogenaamde wesenlike nakoming vereis, maar dit
word oorwegend gegee dat die korrekte
standpunt gestel is in
Maharaj
and Others v Rampersad
1964 (4) SA 638
(A) at 646C –
D,waarverklaar word. . . .
“
The
enquiry, I suggest, is not so much whether there has been 'exact'
'adequate' or 'substantial' compliance with this injunction
but
rather whether there has been compliance therewith. This enquiry
postulates an application of the injunction to the facts and
a
resultant comparison between what the position is and what, according
to the requirements of the injunction, it ought to be.
It is quite
conceivable that a Court might hold that, even though the position as
it is is not identical with what it ought to
be, the injunction has
nevertheless been complied with. In deciding whether there has been a
compliance with the injunction the
object sought to be achieved by
the injunction and the question of whether this object has been
achieved are of importance.”
[29] To sum up: a court
cannot condone non-compliance with the requirement that a copy of the
application must be furnished on the
parties, as specified in s
346(4A)(a). I do not consider that the inherent jurisdiction would
extend the power of the court. But
a court may, in my view, determine
whether the applicant has been in substantial compliance with each of
these sections. In other
words, it is for the court to determine
whether the nature of the furnishing of the application, pursuant to
the section, has been
met.
[30] To express this
point in another way, the means adopted by the applicant to comply
with the section is something which the
court is required to
determine to decide whether there has been substantial compliance, as
I have set it out.’
[16] A distinction was
drawn in that case between compliance with s 346(4A)(a)(iv) and the
remainder of s 346(4A)(a). I understand
the comments of Davis J above
to refer to the remainder of s 346(4A)(a)other than subsec
346(4A)(a)(iv).
[17] I am in respectful
agreement with the views of Levinsohn J as set out above, and would
follow his approach as opposed to that
of Dlodlo J. In this regard
see also
Mthimkhulu v The State
(547/12
[2012] ZASCA 54
,
4 April
2013) paragraphs 7 to 11 as to how to deal with interpretation of
language which prima facie, appears peremptory.
[18] The logic of
Levinsohn J seems particularly apposite as s 9 (4A)(a)(iv) of the Act
provides :
‘
4A(a)
When a petition is presented to the court, the petitioner must
furnish a copy of the petition –
…
(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 the creditors to dispense with it.’
[19] When the order for
substituted service was made, no specific reference was made to the
service of the application papers on
the applicant. That was clearly
a matter which had been dispensed with by the judge who granted the
order. Given the history of
the matter and the lengths to which the
respondents had gone in attempting to obtain service on the
applicant, I cannot envisage
that this was something which was merely
overlooked by the learned judge. The learned judge was no doubt of
the view that the order
for substituted service was the best way to
deal with the problems of non-service.
[20] The service of the
provisional order provided everything that the applicant would have
needed to know, had it come to his attention.
In both the newspaper
publication and in the Government Gazette the details of the
respondent’s attorney were set out and
it would have been a
simple matter for the applicant to have contacted them in order to
obtain a copy of the application papers.
[21] In any case, and
even were this to have been an oversight on the part of the learned
judge, I cannot see how it has resulted
in any prejudice to the
applicant. If the learned judge had ordered that the application
papers were to be served in the same way
as the final order,
according to the applicant, they would not have come to his attention
anyway because he did not become aware
of the provisional order as a
result of the substituted service provisions. In any event, it would
have been an entirely impractical
exercise to have ordered the
service of the application papers by way of the substituted service
order proposed by the learned
judge, at least insofar as that related
to publication of the order in a newspapers and the Government
Gazette.
[22] In my view in
considering an application such as the present one it is also
significant to note that although the final order
of sequestration
was granted on the 8
th
November 2010 the application to
set that order aside was only launched on the 14
th
March
2012. In his founding affidavit the applicant seems careful not to
disclose to the court when he became aware that his estate
has been
sequestrated.
[23] In their answering
affidavits the respondents pertinently pointed out that the applicant
had failed to disclose when he first
knew of the sequestration
proceedings which had been instituted against him. As pointed out in
the answering affidavit, his failure
to do so reflects poorly on his
bona fides as he has failed to make a full, proper and honest
disclosure to the court as to the
circumstances of the matter. It is
significant in this regard that in his replying affidavit the
applicant makes no attempt to
deal with the implied invitation to
disclose when he first became aware of the sequestration proceedings
against him.
[24] In all the
circumstances I do not believe that the applicant has made out a case
for the relief he seeks. Insofar as the exercise
of my discretion may
be a factor, I would exercise it against the applicant because of his
failure fully to disclose the relevant
considerations of when he
became aware of the final order.
[25] I make the following
order :
The application is
dismissed.
The applicant is to pay
the costs of the first, second and third respondents in opposing the
application.
Date of hearing : 7
th
May 2013
Date of judgment : 22
nd
May 2013
Counsel for the Applicant
: K J Kemp SC (instructed by ShaukatKarim& Company)
Counsel for the
Respondent : R G Mossop (instructed by Daly Maqubela Oliphant)