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[1987] ZASCA 101
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Rennie NO v Gordon NO and Another (103/87) [1987] ZASCA 101 (24 September 1987)
IN THE SUPREME COURT OF SOUTH AFRICA
(
APPELLATE DIVISION
)
In the matter between:
ALAN M RENNIE, N O
Appellant
and
RAEL GORDON, N O
1st respondent
DAVID JOHN RENNIE, N O
2nd respondent.
Coram
: CORBETT, VAN HEERDEN, GROSSKOPP. JJA. NICHOLAS et STEYN,
AJJA.
Date of appea
l: 24 August 1987
Date of judgment:
JUDGMENT CORBETT
JA:
The background facts in this matter may be summarized as follows. A company
known as Rooderust (Proprietary) Limited ("Rooderust")
established a
/ township
2
township for residential purposes on certain land near Wellington in the
Cape Province. The township, known as Wellington Extension
No 28, Bergendal, was
duly proclaimed as such on 17 January 1975. It comprised approximately 360
erven. While the township was still
in the course of being established Rooderust
commenced with the sale of erven therein and on 30 November 1972 one Joseph De
Raedt
entered into two deeds of sale in terms of which he pur-chased in all 24
erven from Rooderust. The deeds provided for an initial
payment of ten per cent
of the total pur-chase price on the signing thereof and for the balance to be
paid in monthly instalments
over a period of years. On 7 April 1977 Rooderust
passed a first mortgage bond in fa-vour of Standard Merchant Bank Limited
("SMB")
over the whole of the township property to secure a loan of R250 000 and
the interest payable thereon. On 8 December 1978 Rooderust
was placed under
provisional liquidation
/ and
3
and on 18 April 1979 the provisional order was made final. First
respondent was initially appointed provisional li-quidator of Rooderust
and
later, on 10 July 1979, liqui-dator. I shall refer to him individually as "the
liquidator".
As at the time of liquidation some 325 erven in the township had been sold
and of these 97 had been transferred to the purchasers
thereof. The remaining
228 erven had been sold in terms of agreements whereunder the purchase price was
payable in instalments over
a period of years and transfer of the erven had not
taken place. Included amongst these were the erven sold to De Raedt. It is
common
cause that these agreements of sale constituted "contracts" as defined in
sec 1 of the Sale of Land on Instalments Act 72 of 1971
("the Act"). For
convenience I shall refer to such a contract as "an instalment contract".
The reciprocal rights and obligations of the
/ liquidator
4
liquidator of a company and a person who had
purchased
land from the company prior to liquidation in terms of
an
instalment contract and when liquidation supervened
had not yet taken
transfer thereof, were at this time
governed by sec. 14 of the Act. The Act
was subsequently
repealed by the
Alienation of Land Act 68 of 1981
, which
substituted new legislation covering the same general
field and came into operation on 19 October 1982. It
was not argued in this case,however, that Act 68 of
1981 had any application. The relevant portions of
sec 14; as amended by sec 11 of Act 49 of 1975, read
as follows:
"14. (1) If land which has been sold under a contract, is sold by the
trus-tee or liquidator of the insolvent es-tate of the registered
owner of the
land, or is sold in execution to meet one or more claims against that owner or
his estate, the person who acquired under
an agreement the right to claim
trans-
/ fer
5
fer of that land from that owner or the estate of that owner who has died or
is insolvent or, if such person is deceased or insolvent,
his deceased or
insolvent estate, shall, apart from any other claim which he or his deceased or
insolvent estate may prove against
the said owner or his deceased or insolvent
estate,al-so be entitled to prove a claim against the said owner or his deceased
or insolvent
estate which shall be met from the proceeds of the land and which
shall rank in preference directly after a claim which is secured
by a mortgage
bond over the land in question, for the portion of the purchase price which such
person or his deceased or insol-vent
estate has paid únder the agreement
plus interest calculated at five per cent per annum on the said portion in
respect of
the period from the conclusion of the agreement to the date upon
which the land is so sold by the trustee or liquidator or in execution.
(2) Subject to the provisions of any law or the common law under which
/ certain
6
certain juristic acts which an insolvent has entered into before the
sequestration or liquidation of his estate, may be rescin-ded
by a court of law,
the trustee or liquidator of the estate of an insolvent who is the registered
owner of land which has been sold
under a contract, or the judgment creditor of
a registered owner who has by virtue of a writ in execution against the
immovable property
of the registered owner attached land which has been sold
under a contract, shall call upon the purchaser, or upon the interme-diary
or
upon both, as the case may be, by written notice if the address of the purchaser
or of the intermediary is known, or by two consecutive
notices in a newspaper
circulating in the district in which the address referred to in section 16 is
situate and by notice in the
Gazette, if such address is not known, to take
transfer of the land, and if such purchaser or intermediary does not so take
transfer
of the land, it shall be sold by the trustee or liquidator or in
execution, subject to the claim of the person referred to
/in
7
in subsection (1).
(3) When land sold under a
contract is attached by virtue of a writ
of
execution against the immovable property of the registered owner or when land
sold under a contract is registered in the name of
any person in respect of
whose estate a final order of sequestration or liquidation has been given, and
that land is not encumbered
by a mortgage bond
(4) When in the circumstances
referred to in subsection (3) the
land
sold under a contract is encumbered by
a mortgage bond, the land shall, failing any other arrangement relating to
the transfer thereof to the purchaser, be transferred,
without prejudice to the
rights of any purchaser who purchased the land from any intermediary, if any, by
the deputy sheriff, messenger
of the court, trustee or liquidator concerned, as
the case may be, into the name of the person who has the right to claim
brans-
/ fer of
8
fer of the land and who makes arrangements to the satisfaction, as the case
may be, of the deputy sheriff or messenger of the court,
as contemplated in the
said subsection, or of the Master concerned, within thirty days after the
purchaser or intermediary, or both,
as the case may be, has or have been called
upon in terms of subsection (2) to take transfer, for payment of the outstanding
balance
under the mortgage bond plus interest to the date of the registration of
trans-fer and all such costs of sequestration and administration
as relate to
such land, including any endowment to be made in terms of any law to any person
in respect of such iand, and such other
amounts as rank in preference prior to
the claim secured by the mortgage bond, or of the outstanding balance under the
agreement
plus interest to the date of the registration of transfer, whichever
of the two amounts may be the larger and all other costs in
connection with
transfer, as weli as for the signing of all the documents required in connection
with transfer:
/ Provided
9
Provided that if the holder of a mortgage bond over the land has taken out a
writ of execution in respect of the land, the person
who takes transfer shall
also pay the actual amount paid by the mortgagee or for which he is liable in
respect of the attachment
of the land, before he is entitled to transfer of the
land.
(5) If a person referred to in subsection (3) or (4) has, by virtue of the
arrangements he was required to make under that subsection,
paid more than the
outstanding balance under the agreement plus interest to the date of the
registration of transfer, he may recover
the difference between the two said
amounts from the person from whom he acquired the right to claim transfer of the
land."
The general effect of these
provisions and their impact on the position at common law were fully considered
by this Court in the cases
of
Glen Anil Finance (Pty) Ltd v Joint
Liquidators, Glen Anil Development Corporation
/ Ltd
10
Ltd (In Liquidation)
1981 (1) SA 171
(A), at pp 182 D - 184 E and
Gordon N O.v Standard Merchant Bank Limited
1983 (3) SA 68
(A), at pp 82
A - 83 H, 90 E - 91 H, and what was said in those cases need not be repeated.
Put briefly, the main innovations introduced
by the Act (as compared with the
common law), in a case where a company which has sold land under instalment
contracts is placed
under liquidation, are the following:
(1) Whereas under the common law the liquidator had the exclusive power to
decide whether to implement and enforce the contract vis-à-vis
the
purchaser or to terminate it — the purchaser having no say in the matter
— under the Act this option is in effect
given to the purchaser. In terms
of the Act (sec 14(2) ) the liquidator is obliged to give the purchaser notice
to take transfer
and then,
/ depending..
11
depending on whether the land is encumbered by a mortgage bond or not, the
purchaser has 30 days or 6 months, as the case may be,
to decide whether to take
transfer (against making the required financial arrangements) or not (sec 14(3)
and 14(4) ).
(2) Whereas under the common law a purchaser who did not obtain transfer of
the land sold to him merely had a concurrent claim against
the liquidator for
the repayment of instalments, in terms of the Act (see sec 14(1) ) a purchaser
who opts not to take transfer has
a preferent claim for the repayment of such
instalments, plus interest.
These innovations substantially improved the position of a purchaser under an
instalment contract. As was stated by TRENGOVE JA in
the
Glen Anil
case,
supra
at p 183 in fin,
/ [t]he
12
" [t]he principal purpose of the Legislature was obviously to pro-tect the
interests of a purchaser buying land under such a contract."
At the time of liquidation the principal asset of Rooderust was the township.
Nevertheless the liqui-dator found its affairs to be
(as he put it in a circular
letter to instalment debtors) "highly complex and involved". Two of the problems
confronting the liquidator
were (a) uncertainty as to the legal validity of
SMB's mortgage bond, and (b) uncertainty asto the obligations of a pur-chaser
under
an instalment contract who wished to take transfer of the land purchased
by him and who, accordingly, was required by sec 14(4) to
make arrangements to
the satisfaction of the Maater "for payment of the outstanding balance under the
mortgage bond". As to (a),
the validity of the bond was being disputed on
various grounds, including that it was a collusive dealing in terms of sec 31 of
the
Insolvency Act or a disposition without value in
/ terms
13
terms of sec 26 of the Insolvency Act. The bondholder, however, did not
accept that its bond waa invalid. As to (b), the uncertainty
related to whether
an indi-vidual purchaser under an instalment contract who wished to take
transfer had to make arrangements for
the payment of the whoie outstanding
balance under the bond (which at the date of liquidation amounted to R238 856)
or of only a
proportionate share thereof. And in this regard it is pertinent to
note that the bond itself contained a clause (clause 21) entitling
the mortgagor
from time to time to obtain releases of portions of the mortgaged property from
the operation of the bond against payment
of a release consideration of Rl 200
per residential stand. The bondholder, SMB, took the view that any purchaser who
wished to take
transfer would have to make arrangements for the full amount
owing under the bond; and that the release clause (clause 21) entitled
/ Rooderust
14
Rooderust to obtain the release of erven only so long as it complied with the
conditions of the loan, which it had not done. In this
connection the bondholder
indicated that, if necessary, it would seek to have the bond rectified to give
effect to this term of the
loan agreement.
To resolve the problem referred to under (b) above and with the authority of
all known creditors other than SMB, the liquidator, in
May 1979, instituted
notice of motion proceedings claiming,
inter
alia, an order declaring
that the amount for which individual pur-chasers who wished to take transfer
would have to make arrangements,
as regards "the outstanding balance under the
mortgage bond", was Rl 200 per residential erf. In the founding affidavit
reference
was made to the fact that the principal creditor of Rooderust was
pressing
/ for
15
for an interrogation of the persons concerned before the Master in order to
determine whether there were grounds for setting aside
the bond. The application
was opposed by SMB, which raised the question of rectification. As at the date
of the delivery of judgment
in the Court a
quo
in the present proceedings
this application was still pending. This application was precipitated by a
letter dated 3 May 1979 written
to the liquidator by Mr Attorney Lewis of the
firm of Philip Sarembock and Lewis of Wellington, acting on behalf of one of the
instalment
contract purchasers, a Mr Werner Fehr. In this letter Mr Lewis
expressed the firm opinion that the liquidator was obliged in terms
of sec 14(2)
to call upon purchasers by written notice to take transfer of their erven and
that the maximum amount for which any
individual purchaser would have to make
arrangements in respect of the outstanding balance under SMB's bond
/ was
16
was Rl 200. He called upon the liquidator,
inter alia
, to give the
appropriate notice to his client "forthwith" and threatened an application to
court
if this were not done.
On 6 July 1979 the liquidator addressed a circular letter to all instalment
contract purchasers referring to the vexed questions of
the validity of the
mortgage bond and the obligations of purchasers who wished in terms of sec 14(4)
to take transfer of the erven
pur-chased by them. The letter reported on the
action taken to resolve the latter problem, including the application to court
launched
in May 1979 and the issue of rectifi-cation raised by SMB. In the
letter the liquidator further notified purchasers that the second
meeting of
creditors would be held during August 1979, that he would be giving purchasers
notice in terms of sec 14(2)
/ and
17
and that at the second meeting of creditors he would
take
instructions on what action must be taken against the
purchasers who
do not exercise their rights in terms
of the Act. The letter concludes:
"Purchasers will appreciate that extremely difficult legal problems and
complications arise out of, inter alia, the question of validity
of the Standard
Merchant Bank bond, the doubt raised as to the correct wording of the bond and
the interpretation to be placed on
Section 14(4) of the above Act, which defines
the pur-chasers obligations in respect of the bond if it is valid. Consequently,
purchasers
would be well advised to take advice from their own legal advisers as
soon as they receive the Liquidator's notice in terms of Section
14(2) of the
Act as to what steps each of them should take to protect his
interests."
The first meeting of
creditors of Rooderust (in liquidation) was held on 25 May 1979 and the second
on 10 August 1979. During July
the liquidator circu-lated his report to
creditors and contributories. In
/ this
18
this he reviewed the financial position of the company and discussed certain
pre-liquidation transactions, including the passing of
the SMB bond. He
referred,
inter alia
, to the challenge to the validity of the bond and
the problem as to the meaning and effect of sec 14(4) of the Act in regard to
the
financial obligations of in-stalment sale purchasers who wished to take
transfer under sec 14. He expressed the view that he had
"no option" but to give
notice to such purchasers in terms of sec 14(2) and that in the event of a
purchaser electing not to take
transfer the courses open to him were (i) to
enforce the contract against the purchaser under the common law or (ii) to sell
the
property without having cancelled the instalment sale or (iii) to cancel the
instalment sale and thereafter sell the property.
The second meeting of creditors was duly held on 10 August 1979. At the
meeting a resolution was
/ passed
19
passed authorising the liquidator,
inter alia
, to resolve in respect
of each instalment contract purchaser who elected not to take transfer in terms
of sec 14(2) —
"to enforce and complete such contract provided that if the Liquidator finds
that the purchaser is unable to meet his obligations
in terms thereof the
Liquidator shall be entitled in his dis-cretion to deal with that transaction
and the land which forms the subject
matter of that transaction.in such manner
as he may consider to be in the best interests of the majority in value of
creditors."
Thereafter the liquidator gave notice in terms of sec
14(2) to all the instalment contract purchasers. De Raedt
received two identically worded notices (dated 17 August
1979) in respect of the two instalment sale contracts
entered into by him with Rooderust. The notices read:
"I write to you in my capacity as Liquidator of the above company, which was
finally sequestrated on 18th April, 1979.
According to the records of the company, you have purchased the following
pieces
/ of
20
of land from the company in terms of an Instalment Sales Agreement: (then
follow the numbers of the erven concerned).
The provisions of the Sale of Land on Instalments Act No 72 of 1971
apparently apply to this transaction, and I accord-ingly hereby
call upon you in
terms of Section 14(2) of the said Act to take transfer of the land described
above. Your attention is specially
drawn to Section 14 of that Act and it is
recom-mended that you take legal advice thereon."
De Raedt did not respond to these notices.
The creditors' resolution also authorized the liquidator to hold an enquiry
before the Master of the Supreme Court into the validity
of the bond.
Subse-quently and after 17 August 1979 such an enquiry was in fact held.
As at the date of the second meeting of credi-tors only three claims had been
proved against the com-pany. They were —
/ (1) the
21
(1) the claim by SMB based upon its first mort-
gage bond;
(2) a claim for Rl 023 646, 56 with interest proved
by the Wellington
Municipality in respect of
moneys lent and advanced;
and
(3) an unsecured claim for Rl 908,00 by one Brits.
This position
also obtained on 17 August 1979. As at that date there were also pre-liquidation
rates and taxes due to the Municipality
of Wellington and/or the Divisional
Council of Paarl for which no claims had been proved. If proved, tbese rates and
taxes would
constitute preferent claims ranking, in relation to the proceeds of
the land, ahead of SMB's first mortgage bond (see
sec 89
of the
Insolvency Act
24 of 1936
, read with secs 339 and 342 of the Companies Act 61 of 1973). These
claimants had until 9 November 1979 to prove such claims and
even
/ thereafter
22
thereafter they could still prove claims with the leave of the court or the
Master, provided that final distribution had not taken
place (see sec 44(1),
read with
sec 104
, of the
Insolvency Act and
sec 366 of the Companies Act).
Thereafter disputes arose between the liquidator and SMB in regard to the
liquidator's proposed course of action
vis
-á-
vis
instalment
contract purchasers. This led, in March 1980, to an application to court (in the
Cape Provincial Division) by the liquidator
for an order declaratory of the
liquidator's right, in terms of the resolution adopted by the creditors and
dehors
the pro-visions of sec 14, to give transfer to Fehr (who had also
chosen not to take transfer in terms of sec 14) against payment
by Fehr of the
balance of the moneys owing by him under his contract. The legai issue raised
was whether the liquidator could avail
himseif of the usual common law remedies
to enforce an instalment contract
/ against
23
against a purchaser who had chosen, in response to a notice given in terms of
sec 14(2), not to take transfer. The application was
opposed by SMB which had
been cited as first respondent. Fehr, who was cited as second respondent, abided
the judgment of the Court.
The matter came before BROEKSMA J who granted the
order as prayed (see
Gordon NO v Standard Merchant Bank Ltd and Another
1980 (3) SA 495
(C) ). SMB appealed against this de-cision to the Full Bench
of the Cape Provincial Diyision, which upheld the appeal and ordered
the
dismissal of the application (see
Standard Merchant Bank Ltd v Gordon NO and
Another
1980 (4) SA 637
(C) ). The Full Bench held that where a purchaser
chose, in response to a no-tice under sec 14(2), not to take transfer the
liquidator
did not have the right to pursue common law remedies for the
enforcement of the contract against the purchaser: the liquidator was
obliged,
in terms of sec 14(2), to sell the land, subject to the claim of the
purchaser
/ under
24
under sec 14(1). A further appeal to this Court confirmed the decision of the
Full Bench (see
Gordon NO v Standard Merchant Bank Ltd
1983 (3) SA 68
(A)
).
On 31 October 1980 second respondent was appoint-ed co-liquidator of
Rooderust (in liquidation). Collec-tively I shall refer to first
and second
respondents as "the liquidators". And in April 1982 the liquidators commenced
the legal proceedings against SMB earlier
fore-shadowed, for an order declaring
SMB's mortgage bond to be invalid. This action is still pending. Also during
1982 De Raedt
was declared insolvent and appellant was appointed trustee to
administer his estate.
Further disputes arose as to the validity of the notices sent by the
liquidator to instalment contract purchasers in terms of sec.
14(2) and in
August 1984 the liquidators instituted the present action in the Cape Provincial
Division, citing appellant in his capacity
/ as
25
as trustee and claiming certain declaratory orders in respect of the
instalment contracts entered into between Rooderust and De Raedt.
I shall not refer to the pleadings since they were superseded by a special
case submitted by the par-ties in terms of Rule 33 of the
Uniform Rules of
Court. The aforegoing summary of the background facts is gleaned from the
speciai case and the documents annexed
thereto. The questions of law in dispute
which were submitted for adjudication by the Court were (I quote from the
special case):
"1. Whether, in the light of:
(a)
The disputes and/or
proposed or pending litigation concern-ing the validity of the mortgage bond and
its terms relating to the release
of erven for the purpose of transfer to
individual purchasers: and/or
(b)
The fact
that the liquidator was holding an inquiry to enable him to decide whether to
contest the validity of the bond and
/
therefore
26
therefore may well have insti-tuted action challenging its validity; and/or
(c) The fact that as at 17 August 1979 no claims had been proved in respect of
such other amounts as might rank in preference prior
to the claim secured by the
mortgage bond, the period for proving claims not having expired at that
date,
the liquidator could validly give notice in terms of Section 14(2) of Sale of
Land on Instalments Act, Act No 72 of 1971.
(2) Whether, in any event, the notices dated 17 August 1979 (annexures "Gl" and
"G2") were valid and complied with the re-quirements
of Section 14(2) read with
the provisions of Section 14(3) and 14(4) of the
Act:
(a) In the absence of any information therein enabling the purchaser to decide
whether Section 14(3) or Section 14(4) applied;
(b) If Section 14(4) applied, in the absence of detailed information therein in
respect of the matters
/ referred
27
referred to in the sub-section so as to enable the purchaser to make the
necessary arrangements to the satisfaction of the Mas-ter
within the 30 day
period provided for therein."
In regard to the first qúestion, the liquidators contended that the
liquidator could vaiidly give notice in terms of sec. 14(2)
of the Act, while
the appellant contended that in the light of the facts referred to in l(a), (b)
or (c) above he could not. In regard
to the second ques-tion, the liquidators
contended that the notices were valid notices and complied with the requirements
of sec
14(2) of the Act, whereas the appellant contended that in the ab-sence of
the information referred to in 2(a) or (b) above they did
not. It was further
agreed in the special case that if both these questions were answered in favour
of the liquidators, then they
were entitled to an order in terms of prayers (a),
(b) and (c) of their particulars of claim;
/ but
28
but that if either question was decided in
appellant's
favour, then the liquidators' claims should be dismissed
with
costs. Prayers (a), (b) and (c) of the particulars
of claim read as
follows:
"(a) An order declaring that the notice to the insolvent, annexure 'A' , is a
valid notice in terms of the provi-sions of section
14(2) of the Act;
(b)
An order declaring that the
insolvent is a purchaser who, in respect of the said land did 'not so take
transfer of the land' within
the meaning of section 14(2) of the
Act;
(c)
An order declaring that Plaintiffs
are entitled and obliged to sell the said land in terms of the provisions of
section 14(2) of the
Act."
The matter came before
AARON AJ who decided both questions in favour of the liquidators, made an order
in terms of prayers (a), (b)
and (c) and ordered that appellant pay the costs of
the action. Subsequently, on 2 June 1986, AARON AJ granted leave to appeal to
this
/ Court
29
Court and ordered that the costs of the application for leave to appeal be
costs in the appeal. Appellant's attorneys proceeded with
the usual steps
necessary to bring the appeal before this Court. A record of appeal was prepared
by the official recorders and transcribers,
Sneller Opnames (Cape) (Pty) Ltd
("Sneller") and this was filed prior to the due date of 2 September 1986. This
record was, however,
incomplete. It contained the plead-ings and judgment of the
Court a
quo
, but not the special case and its annexures. Appellant's
attorney discovered this only in January 1987 when it was brought to his
atten-tion by counsel who had been instructed to prepare heads of argument.
Thereafter the missing portion of the record was prepared,
filed and served on
the liquidators, but of course this was out of time. There is consequently
before us an application for condonation
of appellant's failure to file
timeously the complete record of appeal.
/ In
30
In his supporting affidavit to the petition appellant's attorney sets forth
the aforegoing facts and states that the record which
he received from Sneller
was certified by Sneller as being a true copy and that he relied upon this
certificate and believed it to
be a full record taken from the Court file when
he forwarded it to his correspon-dents in Bloemfontein. He also states that the
attorneys
of record for the liquidators have indicated that the appli-cation for
condonation will not be opposed.
At the hearing before us appellant's counsel moved the application for
condonation. Counsel for res-pondents (the liquidators) indicated
that while the
appli-cation was not being opposed, he did not concede that the appeal had
reasonable prospects of success. Since
the grant or refusal of condonation is
partly dependent upon the prospects of success, full argument on the merits of
the appeal
was heard and judgment was reserved.
/ Before
31
Before considering the merits and appellant's prospects of success, I
wish to make some observations about the reasons advanced as
to why an
incomplete record was originally lodged with this Court. The explanation of
appellant's attorney has already been recounted.
It is, in my view, an
unsatisfactory explanation. It reveals an apparent misconception as to the duty
of an attorney in regard to
an appeal record. As appears from the remarks of my
Brother VILJOEN in the case of
Senator Versekerings
-
maatskappy Bpk v
Lawrence
1982 (3) SA 136
(A), at pp 144 G - 145 B, it is the duty of an
attorney charged with prosecuting an appeal on behalf of a client to see that a
proper
record of appeal is placed before this Court and in order to
dischárge this duty (and incidentally to earn his perusal fee)
he must
peruse the record and satisfy himself that it is complete and in compliance with
the Appellate Division rules as to form,
etc. I infer
/ that
32
that appellant's attorney did not do this. He merely relied on Sneller's
certificate. This was not a proper discharge of his duty.
Had he perused the
record produced by Sneller in the required manner he would inevitably have
realised that it was incomplete in
a fundamental respect in that the most
relevant documentation placed before the Court a
quo
, viz the special
case, was missing. Appellant's counsel conceded that in the circumstances the
perusal fée should be disallowed
as between attorney and client and I
shall make an appropriate order in this regard. I might just add that even the
additional volume
lodged out of time (which contained the special case and
annexures) was not in proper form in that it lacked an index, an annoying
and
inconvenient defect. But I leave it at that.
I come now to the merits; and in considering them I shall commence with the
first question posed in the special case, viz. whether
the liquidator could
validly give notice in terms of sec 14(2) of the Act at the time
/ when
33
when he did, ie on 17 August 1979. In arguing that as at that date the
liquidator had no power to give notice under sec 14(2), appellant's
counsel
relied mainly on the uncertainty as to the validity of the bond and as to the
extent of the financial obligations of an instalment
contract purchaser who
wished to take transfer. He submitted that until these uncertainties had been
removed the liquidator was not
entitled to give notice under sec 14(2) and any
purported notice given was premature.
Sec 14(2) - quoted above - provides that a liquidator of the estate of an
insolvent who is the registered owner of land which has
been sold under an
instalment contract —
" shall call upon the purchaser ....
by written notice .... to take transfer
of the land "
/ The
34
The sub-section creates both a power and an obligation.
Counsel's argument that the power could not be exercised prior to the
uncertainties referred to having been re-moved was based (a)
on the opening
words of sec 14(2) and alternatively (b) on a necessary implication in sec
14(2).
The opening words relied upon read:
"Subject to the
provisions of any law
or the common law under which certain
juristic acts
which an insolvent has
entered into before the sequestration
or
liquidation of his estate, may be
rescinded by a court of law "
Appellant's counsel submitted that, since at the time of the
giving of the notice under sec 14(2) in the present case
proceedings for the rescission of the bond, both under
the common law and under secs 26 and 31 of the Insolvency
Act, were contemplated, the opening words applied
and they precluded the liquidator from giving such
/ notice
35.
notice. This is a brand-new argument. It was not addressed to the Court a
quo
, nor did it figure in counsel's heads of argument.
In
S v Marwane
1982 (3) SA 717
(A) this Court had to consider the
meaning of the words "subject to the provisions of this Constitution" appearing
in sec 93(1) of
the Republic of Bophuthaswana Constitution Act 18 of 1977.
MILLER JA, delivering the majority judgment, stated (at p 747 H - 748
A)
—
"The words 'subject to the provisions of this Constitution' in s 93(1) of the
Constitution clearly govern the provision that laws
in operation immediately
prior to the commencement of the Constitution are to continue in operation. The
pur-pose of the phrase 'subject
to' in such a context is to establish what is
dominant and what subordinate or subservient; that to which a provision is
'subject',
is dominant — in case of conflict it
/ prevails
36
prevails over that which is subject to it.
Certainly, in the field of legislation,
the phrase has this clear and accepted
connotation. When the legislator wishes
to convey that that which is now being
en-
acted is not to
prevail in circumstances where
it conflicts, or is inconsistent or incom-
patible, with a specified other enactment,
it very frequently, if not almost invariably,
qualifies such enactment by the method of
declaring it to be 'subject to' the other
specified one. As MEGARRY J observed in
C and J Clark v Inland Revenue
Commissioners
(1973) 2 All ER 513
at 520:
'In my judgment, the phrase "subject to" is a simple provision which merely
subjects the provisions of the subject subsections to
the provi-sions of the
master subsections. When there is no clash, the phrase does nothing: if there is
collision, the phrase shows
what is to prevail,"
Clearly in the present context the power and duty of the liquidator to give
notice under sec 14(2) is made subject to the "provisions
of any law or the
common law" referred
/ to
37
to in the opening words quoted above. For convenience of reference I shall
refer to such laws as "rescission laws". Thus the rescission
laws are dominant
and the sub-stantive provisions of sec. 14(2) relating to the giving of notice
are subordinate. The rescission
laws referred to are those which give rise to
the so-called "impeachable transactions" (see Mars
The Law of Insol
vency
in Sout
h Africa 7
th ed, chap 12) under the common law and various
provi-sions of the
Insolvency Act, including
secs. 26 (disposi-tions without
value) and 31 (collusive dealings). Where a liquidator has reason to believe
that a pre-liquidation
transaction entered into by the company may be
impeach-able it is his duty to make proper enquiries into the transaction; and
if
then satisfied that it is impeach-able it is his duty, provided that the
creditors approve of his action, to institute proceedings
to set aside the
transaction (see
Turkstra v Goldberg NO
1946 TPD 535
,
/ at pp
38
at pp 539-40;
Swadif (Pty) Ltd v Dyke N0
1978 (1) SA 928
(A), at p 940
E - F). Where an instalment sale contract entered into by the company prior to
liquidation is impeachable or thought
to be impeachable, then clearly the
liquidator's duty interms of
sec 14(3)
to give no-tice to the purchaser is in
conflict with his duty to take the above-described action in terms of the
appropriate rescission
law. This conflict brings into operation the opening
words of
sec 14(2)
, which decree that the rescission law and the duties imposed
thereby are to prevail. That, in my view, represents the meaning and
intended
scope of the opening words of
sec. 14(2).
They have application only where an
instalment contract is the transaction which may be rescinded. They do not apply
in the case
of other types of transaction entered into by the company, such as
the passing of a mortgage bond, where the duty of the liquidator
to
investigate
/ and
39
and if necessary take steps to rescind the transaction does not conflict with
his duty to give notice under
sec 14(2)
to instalment contract purchasers. In my
opinion, therefore, the argument founded upon these opening words has no
prospects of success.
I turn now to the alternative argument based upon implication. Appellant's
counsel, recognising that there was no express provision
in
sec 14(2)
which
pre-cluded the liquidator from giving notice before uncer-tainties concerning
the mortgage bond had been elimina-ted, sought
to rely upon an implied provision
to that effect. Over the years our courts have consistently adopted the view
that words cannot
be read into a statute by implication unless the implication
is a necessary one in the sense that without it effect cannot be given
to the
statute as it stands (see eg
Germiston Munic
i
palit
y
v Rand Cold
Storage Co Ltd
1913 TPD 530
, at p 539;
/ Taj
40
Taj Properties (Pty) Ltd v Bobat
1952 (1) SA 723
(N), at
729 E-H;
S v Van Rensburg
1967 (2) SA 291
(C), at 294 C-D;
The Firs
Investment Ltd v Johannesburg City Council
1967
(3) SA 549 (W), at p 557 B-C;
D E P Investments (Pty) Ltd
v City Council, Pietermaritzburg
1975 (2) SA 261
(N), at
265 G-H;
Hamman en 'n Ander v Algemene Komitee Johannesburgse
Effektebeurs, en 'n Ander
1984 (2) SA 383
(W), at p 391 H).
In the
Firs Investments
case,
supra
, TROLLIP J (as he then
was) stated (at p 557 E-G):
"Moreover, a strong factor militating against the implication of any such
limitation is the difficulty of formu-lating it. In contract
a term will not be
implied where considerable uncer-tainty exists about its nature and scope,
for it must be precise and obvious
I think that the same must apply to im-
plying a term in a statute, for
the pro-
cess is the same "
In support of his argument that words must be
implied in
sec 14(2)
which limit the power of the li-
quidator to give notice to instalment contract pur-
/chasers
41
chasers, appellant's counsel stressed the difficult posi-
tion in which
such a purchaser finds himself where he
is given notice under
sec 14(2)
and
the uncertainties
concerning a mortgage bond over the land, such as those
in the present case, remain unresolved. Because of
the uncertainty
concerning the validity of the bond -
so the argument proceeded - the purchaser does not know
whether
sec 14(3)
or
sec 14(4)
applies. This affects
the time within which he must choose whether to take
transfer and make the required financial arrangements
and it also affects the nature and scope of the financial
arrangements he must make. Furthermore the unresolved
uncertainty as to whether under
sec 14(4)
the purchaser
must make arrangements for payment of the entire outstand-
ing balance under the bond or only a proportionate share
thereof further compounds the difficulties confronting
the purchaser who has to decide whether to take transfer :
or not.
/ I
42
I do not think that these uncertainties lead
to the
conclusion that it is necessary to imply a limi-tation upon the power of the
liquidator to give notice under
sec 14(2)
in the sense that without such an
im-plication effect cannot be given to
sec 14(2)
as it stands. It is true that
as at 17 August 1979, when De Raedt and other purchasers were given notice under
sec 14(2)
there was sufficient uncertainty as to the validity of the bond for
the liquidator to intend to initiate an enquiry into whether
or not it was an
im-peachable transaction; and the purchasers had been in-formed of this.
Nevertheless as at that date there was
a bond registered over the land. Unless
and until the bond was set aside as an impeachable transaction, the land was in
fact "encumbered
by a mortgage bond" within the meaning of
sec 14(4)
and
purchasers to whom notice was given under
sec 14(2)
would have to react
/ within
43
within the parameters of
sec 14(4).
Moreover, as was rightly emphasized by
respondents' counsel, a purchaser wishing to take transfer is only required by
sec 14(4)
to "make arrangements" to the satisfaction of the Master for the
payment,
inter alia
, of the outstanding balance under the mortgage bond.
It was stated by the Judge a
quo
that in a case of uncertainty as to the
validity of the bond the Master would in practice ask for security to be given
for such amount
as is eventually determined to be owing. Whether this is what
does happen in prac-tice is not, clear, but it certainly appears to
be a
prac-tical and common sense way around the impasse.
The uncertainty as to the amount for which a purchaser wishing to take
transfer should make provision in respect of the outstanding
balance under the
mortgage bond, ie whether for the full amount of the bond or a proportionate
share, is a problem of statutory interpretation
/ which
44
which could arise in many instances where land subject to a bond comprises
erven which have been sold to dif-ferent purchasers under
instalment contracts.
If in a particular case such a purchaser wished to take trans-fer he would have
to make financial arrangements
to the satisfaction óf the Master. A
dispute as to the correct quantum might arise and this might have to be resolved
by the
Court. And if this could not be done within acceptable time limits, then
the purchaser might, as the Court a
quo
put it, have to make arrangements
to cater for "the most adverse eventuality". But I can see no warrant for saying
that
sec 14(2)
cannot be given effect to without the suggested implication.
Moreover there are factors which strongly mili-tate against such an
implication. Firstly, there is real difficulty in formulating
the terms of the
impli-cation. Appellant's counsel was invited to do so and
/ eventually
45
eventually he suggested that the following words
be
implied and inserted after the word "shall" (in the
phrase "shall call
upon the purchaser) in
sec 14(2)
—
"...... once the trustee or liquidator
or judgment creditor, as the case may
be, has established whether the
property
is validly encumbered by a mortgage bond
and which of subsections
(3) and (4)
applies "
It is immediately to be noted that this formulation does not
appear to
cater for uncertainty about the amount for
which the purchaser has to make
arrangements in regard
to the outstanding balance under the mortgage
bond.
Furthermore, theword "established" in this formulation raises fresh
uncertainty. At what point can the liquidator, for example, be
said to have
esta-blished a valid encumbrance? If he is satisfied as to the validity of the
bond, is that sufficient? Sup-pose that
he is so satisfied, but a creditor is
not and
/ the
46
the creditor threatens legal proceedings in terms of
sec 32(1)
of the
Insolvency Act? And
suppose a dispute as to the validity of the bond erupts
after the notice has been given but before the time given to the purchaser
to
make his choice has elapsed? All in all it seems to me that the proposed
implication creates more problems than it solves.
Secondly, it is obvious that where there is a dispute as to the validity of
the mortgage bond, the suggested implication would hold
up the giving of notice
under
sec. 14(2)
for a substantial period of time, possibly even for years. Not
only would this delay the realiza-tion of the insolvent estate —
not a
desirable state of affairs (cf the remarks of FRIEDMAN J in
Standard Merchant
Bank Ltd v Gordon NO
1980 (4) SA 637
(C), at p 647 F) — but it would
also prevent a purchaser who wished to take transfer from exercising his right
of
/ choice
47
choice pending "the establishment" of the validity of the bond. I cannot
think that this could have been the intention of the Legislature.
Thirdly, as pointed out by the Judge a
quo
,
sec 14
also applies to judgment
creditors. This is
recognized by appellant's counsel in their formulation
of the suggested implication. And as the Judge a
quo
rightly remarks —
"Unlike a liquidator, a judgment credi-tor will generally be in no better
posi-tion than the purchaser of the erf as re-gards knowledge
of the validity or
terms of any mortgage bond that may be regis-tered over the land. He will not be
in the same position as a liquidator
to in-stitute proceedings to determine
disputed questions. What is perhaps even more important is that it is unlikely
that the legislature
would have intended that al-though the property has already
been attached, the sale in execution must be delayed until issues such
as, e g
the vali-dity and terms of the mortgage bond, have been determined."
/ Appellant's
48
Appellant's counsel submitted that it was im-plicit in
sec 14(2)
that the
land in question must be capable of being transferred when the purchaser is
called upon to take transfer; and that where,
as in the present case, the very
validity óf the bond, as well as the amount which must be paid is in
dispute and is the subject
of pending litigation (to which the liquidator is a
party), transfer cannot be given. This last conclusion is, to my mind, a
non
sequitur
. Disputes about the bond would not prevent the liquidator from
giving transfer to the purchaser. At most they might create uncer-tainty
as to
what financial arrangements a purchaser who wished to take transfer would have
to make; but this uncertainty, as I have shown,
would not create an insuperable
obstacle.
Next it was argued on appellant's behalf that the effect of
sec 14(2)
, (3)
and (4) was to give the
/ purchaser ,
49
purchaser a "statutory right of election" whether or not to take transfer and
that in order to exercise that right it must be ascertainable
by the purchaser
whether the land is encumbered by a bond or not and, if so, what the outstanding
balance under the bond is. Consequently,
so the argument ran, if these facts are
not ascertainable the purchaser is not in a position to make a "meaningful
election" and
notice under
sec 14(2)
is not competent. This argument seems to
merely repeat, in a different guise, the arguments already raised and
considered. In so
far as the "non-ascertainable" facts do really affect the
purchaser's choice and introduce uncertainty, they are imponderables which
the
purchaser must take into account when deciding whether to take transfer or
not.
With reference to para l(c) or the questions of law formulated in the special
case, it was argued
/ by
50
by appellant's counsel that since at the time when the notice under
sec 14(2)
was given claims in respect of amounts which (if proved) would "rank in
preference prior to the claim secured by the mortgage bond"
had not been proved
(this had reference to the unpaid rates and taxes due to the two local
authorities) and since until proved the
amounts of the claims could not be
as-certained, the notice given was premature. This argument also rests upon ah
alleged implication.
There is, in my view, no substance in it. Ascertainment of
the quantum of these claims would not necessarily depend on proof and
if a
purchaser decided to take transfer it would be for the Master to decide what
financial ar-rangement in respect of such claims
should be made. Since claims
may be proved, with the necessary leave, at any time before final distribution
it seems unlikely that
the Legislature would have intended realization
/ of
51
of the land to be held up in this way. There is, in my view,
no basis for the suggested implication.
I come now to the second question raised in the special case. Appellant's
argument here is really a variation upon the same theme.
It stresses again the
uncertainties
as to whether
sec 14(3)
or
sec
14(4)
applied, the absence of detailed information about the amounts for which
arrangements had to be made by a pur-chaser who wished to
take transfer; and on
this basis it contends, not that the liquidator had no power to issue the
notices under
sec 14(2)
, but that the notices themselves were invalid because
they did not contain this information. This argument, too, rests upon the
foundation
of an implied provision. Most of the objec-tions to an implied
provision as to the liquidator's' powers under
sec 14(2)
, detailed above, are
equally appli-cable here.
/ In
52
In support of the submission that in order to enable the purchaser to make a
proper election he must be furnished with all the relevant
information,
appellant's counsel referred to
Feinstein v Niggli and Another
1981 (2)
SA 684(A)
, at p 698 E - 699 D and
Thomas v Henry and Another
1985 (3) SA
889
(A), at p 896 A-G. These cases dealt with election in the contractual
sphere. In
Feinstein
's case the question was whether in the case of a
contract vitiated by mis-representation the representee had by his conduct
elected
to affirm the contract; and the Court expressed the view that election
generally involves a waiver: one right is waived by choosing
to exercise another
right which is inconsistent with the former. The issue in
Thomas v Henry and
Another
was whether a party to a con-tract who had cancelled it on the
ground of misrepresenta-tion should be held to have waived or abandoned
his
can-
/ cellation
53
cellation by reason of his subsequent conduct. In
Feinstein
's case it
was emphasized that the party al-leging affirmation of the contract had to prove
that the representee made his election
with full knowledge of all relevant
facts.
I doubt whether it is corrêct to equate the
choice or option granted to a purchaser under
sec 14(2)
with an election in
the sense referred to in
Feinstein
's case (cf the English case of
Young v Bristol Aeroplane Company Limited
1946 AC 163
, at pp 172-3,
176-7, 178-9, 189-90), but in any event I fail to see the relevance of the
doctrine of election in the present case.
The issue is not whether the purchaser
is bound by his "election" not to take transfer, but whether the notice given
him complied
with the requirements of aec 14(2). And I fail to see the necessity
for implying in
sec 14(2)
the requirement that the notice must contain all the
infor-
/ mation
54
mation necessary to enable a purchaser to make an informed choice. After all,
a person in his position could be expected to make some
enquiries of his own.
And it is to be noted that the notice draws attention to the Act and recommends
that he take legal advice thereon.
I accordingly do not think that the argument
as to an implied provision or that the notice given was invalid has any prospect
of
success.
For these reasons I conclude that, having re-gard to the seriousness of
appellant's failure to comply with the Rules of this Court
and the lack of
prospects of success, condonation should not be granted.
In regard to costs, the Court a
quo
made the costs of the application
for leave to appeai dependent on the outcome of the appeal. The refusal of the
appli-cation for
condonation means that the appeai proper is
/ not
55
not adjudicated upon, but clearly in
terms of the order of the Court a
quo
appellant must pay these costs. In
order to obviate uncertainty I will make an order declaratory of the
position.
It is ordered:
(1) That the application for condonation of appellant's failure to lodge
timeously the complete record of appeal be refused with
costs, such costs to
include the respondents' costs in relation to the appeal and also to include
costs of two
counsel.
(2)
That in terms of the order made by the
Court
a
guo
appellant must pay the costs of
the appli-cation for leave to appeal.
(3) That the costs of the perusal of the original
(incomplete) record lodged
with this Court be
disallowed as between appellant and his
attorney.
M M CORBETT
VAN HEERDEN JA) GROSSKOPF JA) NICHOLAS AJA) CONCUR STEYN AJA)