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[1992] ZASCA 18
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Spendiff NO v Kolektor (Pty) Ltd. (267/91) [1992] ZASCA 18; 1992 (2) SA 537 (AD); [1992] 2 All SA 50 (A) (12 March 1992)
CASE NO. 267/91
/ccc
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE
DIVISION)
In the matter between:
LLOYD EDWARD SPENDIFF
N.O.
APPELLANT
and
KOLEKTOR (PROPRIETARY)
LIMITED
RESPONDENT
CORAM
: HOEXTER, NESTADT, VIVIER, MILNE
et
GOLDSTONE JJA
DATE HEARD
: 20 FEBRUARY 1992
DATE DELIVERED
:
12 MARCH 1992
JUDGMENT NESTADT, JA
The appellant, in his capacity as liguidator of a company, sued the
respondent in the Durban and Coast Local Division. In addition
to pleading over
on the merits of
2/
2.
the claim, the respondent, by way of a special plea, objected to the court's
jurisdiction. The appellant excepted to the special plea
as disclosing no
defence. McCALL J dismissed the exception. This appeal is against such
dismissal. It is brought with the leave of
the court
The appellant's claim is for an order setting aside the payment of an amount
of R325 523.00 allegedly made by the company to the respondent
and for the
recovery thereof. The cause of action is based on sec 340(1) of the Companies
Act, 61 of 1973, read with
sec 26(1)(b)
of the
Insolvency Act, 24 of 1936
. In
terms of
sec 340(1)
of Act 61 of 1973, every disposition by a company of its
property which, if made by an individual, could, for any reason, be set
aside in
the event of his insolvency, may, if made by a company, be set aside in the
event of the company being wound up and unable
to pay all its debts, "and
the
3/
3.
provisions of the law relating to insolvency shall
mutatis
mutandis
be applied to any such disposition". Sec
26(1)
of Act 24 of 1936 is the well-known provision dealing
with
dispositions without value. It reads:
"Every disposition of property not made for value may be set aside by the court
if such disposition was made by an insolvent
-
(a) more than two years before the sequestration of his estate, and it is proved
that, immediately after the disposition was made,
the liabilities of the
insolvent exceeded his assets;
(b) within two years of the sequestration of his estate, and the person claiming
under or benefited by the disposition is unable
to prove that, immediately after
the disposition was made, the assets of the insolvent exceeded his
liabilities."
There follows a proviso
which is not material to the
present dispute. The appellant's summons alleged that the
company had been wound up by reason of an inability to pay
its debts; that on a date about twelve months prior to
its winding up, the company paid the amount in question to
the respondent; and that such payment constituted a
4/
4. disposition of the company's property not
made for value.
The facts relevant to the jurisdictional issue
may
be briefly stated. The respondent is a domestic
corporation. However, its
registered office is not
situate within the area of jurisdiction of the
Durban and Coast Local Division. The respondent's registered office (and, so it
would
seem, its main place of business) are in Johannesburg. Furthermore,
according to the special plea, the appellant's cause of action
did not arise
within the jurisdiction of the trial court. These allegations would normally
constitute a sound basis for objecting
to the court's jurisdiction. This was not
in dispute. What the appellant relies on in these circumstances to establish
jurisdiction,
is the fact (alleged in the summons) that it was the Durban and
Coast Local Division which granted the order winding up the company.
The main argument presented on behalf of the appellant was founded on two
broad propositions, namely: (i) on a proper interpretation
of the
Insolvency
Act, the
5/
5. word "court" in
sec 26(1)
means the court
which
sequestrated the debtor; it is this court which therefore
has jurisdiction
to set aside a disposition without value
made by the insolvent; and this is so whether the defendant is otherwise
subject to such court's jurisdiction; (ii) the effect of
sec 340
is to render
applicable, in relation to impeachable dispositions by a company, not only the
relevant substantive provisions of the
Insolvency Act, but
also its procedural
provisions; these included the jurisdictional rule referred to; accordingly, and
making the necessary adaptations
to it, the forum competent to set aside a
disposition by a company prior to its liguidation is the one which grants the
winding up
order. In the result, so it was said, it mattered not that the
respondent was a
peregrínus
of the Durban and Coast Local Division
and that the appellant's cause of action did not arise there; that court had
jurisdiction
simply on the basis that it had granted the order winding up the
company.
I turn to a consideration of whether, in terms
6/
6.
of
sec 26(1)
, it is the court which sequestrated the
insolvent that has
jurisdiction to set aside a disposition
made without value ((i) above).
"Court" is defined (in
sec 2 of the Act) as follows:
"In this Act unless inconsistent with the context -
'Court' or 'the Court',
in relation to any matter
means the provincial or
local division of the Supreme Court which has jurisdiction
in that matter
in terms of section one hundred and forty-nine or one hundred and fifty-one, or
any judge of that division; and in relation to any
offence under this Act or in
section eight, twenty-six, twenty-nine, thirty, thirty-one, thirty-two,
paragraph (a) of sub-section
(3) of section thirty-four, seventy-two,
seventy-three, seventy-five, seventy-six, seventy-eight or one hundred and
forty-seven the
expression 'Court' or 'the Court' includes a magistrate's court
which has jurisdiction in regard to the offence or matter in question."
(My
emphasis.)
Sec 151 deals with the review of
decisions, rulings and
orders of the Master or the officer presiding at a
meeting
of creditors. It is unnecessary to quote it. Of crucial
importance, however, is sec 149. It reads:
7/
7.
"(1) The court shall have jurisdiction under this Act over every debtor and
in regard to the estate of every debtor
who
-
(a) on the date on which a petition for the acceptance of the surrender or for
the sequestration of his estate is lodged with the
registrar of the court, is
domiciled or owns or is entitled to property situate within the jurisdiction of
the court; or
(b) at any time within twelve months immediately preceding the lodging of the
petition ordinarily resided or carried on business
within the jurisdiction of
the court:
Provided that when it appears to the - court equitable or convenient that the
estate of a person not domiciled in the Republic be
sequestrated elsewhere, or
that the estate of a person over whom it has jurisdiction be sequestrated by
another court within the
Republic, the court may refuse or postpone the
acceptance of the surrender or the sequestration.
(2) The court may rêscind or vary any order made by it under the
provisions of this Act". (Again, my emphasis.)
In
summary, the submission of Mr
Meskin
on behalf of the
appellant was
that the "court" in sec 26(1) meant the
"Court" as defined in sec 2; this in
turn led one to sec
149(1); the court there referred to is the one which
on
8/
8.
the basis
inter alia
of the debtor's domicile or ordinary residence
has jurisdiction to sequestrate his estate or accept its surrender; hence (to
complete
the reasoning) "the court" in sec 26(1) means the court which
sequestrated the debtor's estate.
It is a matter of some difficulty to
determine the true meaning of the word "Court" as defined in sec 2. It is an
important definition.
The word occurs not only in sec 26(1) but in various other
sections of the
Insolvency Act. In
Dyter and Tiran vs Vorster NO
1922 OPD
218
, DE VTLLIERS JP described the broadly similar definition of court as
contained in
sec 2
of the previous
Insolvency Act (32
of 1916) as "an instance
of rather inartistic draughtsmanship". This criticism applies equally to the
present definition. I confine
my attention to the first part, ie up to "judge of
that division". In doing so, I leave aside the effect of the qualification
"unless
inconsistent with the context". The definition tells
9/
9.
one that "in relation to any matter", "Court" means a provincial or local
division of the Supreme Court. So much is clear. But in
what matters? And which
provincial or local division has jurisdiction? The reference to
sec 151
is
uninformative. The section is silent on what court has review jurisdiction. That
leaves the reference to
sec 149.
Here there is an unfortunate lack of clarity.
Had it stated that "Court" means the provincial or local division "which has
jurisdiction
in terms of
sec 149"
, then the grounds of jurisdiction might simply
have been those mentioned, namely, the debtor's domicile etc. But the definition
does
not say this. There is the reference to "in that matter". This expression
must obviously be taken account of. It can only relate
to the first-mentioned
matter, ie "any matter". If regard is had to the Afrikaans eguivalent, viz, "met
betrekking tot een of ander
aangeleentheid" in the signed Afrikaans version of
the Act, this phrase must be taken to
10/
10. denote "any particular matter". Sec 150 is of
significance. Sub-sec (5) confines appeals "against any order made by the court
in terms of this Act" to final orders of sequestration and orders setting aside
provisional sequestrations (see sub-sec (1)). The
legislature could not have
intended to deprive a defendant, against whom an order in terms of sec 26(1) is
granted, of the right
to appeal. So "Court" in sec 2 must be given a restrictive
interpretation. It would seem therefore that the effect of the definition
is the
following. In matters falling under sec 149 (ie where the proceedings relate to
a debtor or his estate), the jurisdictional
criteria therein referred to
determine which is the competent provincial or local division. In matters not
governed by sec 149 the
definition does not operate; the ordinary grounds of
jurisdiction apply. This, in essence, is what McCALL J, after a close analysis
of the relevant sections, concluded. Approaching the problem on this basis,
the
11/
11.
guestion that arises is whether a claim under sec 26(1) is justiciable under
sec 149. Plainly, the recipient of a disposition without
value is not a "debtor"
(which is defined in sec 2). Mr
Meskin
, however, submitted that a claim
of the kind under consideration is one "in regard to the estate of every
debtor"; and that on this
basis the court which sequestrated a debtor's estate
has jurisdiction over a person who is sued in terms of sec 26(1). I am unable
to
agree. It is true that what is recovered by a trustee as a result of setting
aside an insolvent's impeachable transaction (such
as a disposition without
value) falls into and thus benefits the insolvent estate. In a sense therefore a
claim under sec 26(1) may
be said to concern or relate to (which according to
Black's
Law Dictionary
, 5th ed, 713, is what "in regard to" means) the
estate of the insolvent debtor. I am satisfied, however, that on a proper
construction
of sec 149 this is not what the legislature intended. The argument
involves the
12/
12.
proposition that the section confers jurisdiction not only
over the debtor
but over third parties as well. In
Dyter's
case,
supra
, DE
VILLIERS JP, dealing with the similarly
worded predecessor to sec 149, viz
sec 150 (contained in
chapter 9) of the old Act, expressed a contrary
opinion.
The learned judge said (at 220):
"Chapter 9 lays down, broadly speaking, that the court shall have jurisdiction
over the persons and estates of insolvents owning
property or residing or
carrying on business within the territoriai limits of the court's jurisdiction,
but it does not purport to
deal with the guestion of jurisdiction in the case of
actions or proceedings brought by the trustee against third parties, ie.,
against
parties other than the insolvent; for instance, actions for voidable
preference. In the case of such actions, the ordinary rule of
jurisdiction
applies, eg., that the forum of the defendant is to be followed,
etc."
These dicta are in point and I respectfully
adopt them. There are sound reasons for doing so. They are:
(a) Any interpretation of sec 149 must take account
of the basic common law principle of our
law
13/
13. that
actor sequitur forum rei
, ie you sue a
defendant in his forum (
Sciacero and Co vs Central South African Railways
1910 TS 119
at 121). Clear wording would be required to deny a defendant (who
could be a
pereqrinus
of the country as a whole) this procedural
advantage. Sec 149(1) does not achieve this.
(b)
No special significance
attaches to the phrase "in regard to the estate of every debtor". In terms of
sec 9, it is the estate of the
debtor that is sequestrated. In any event,
Parliament obviously felt it necessary to spell out that a court seguestrating a
debtor
is to have jurisdiction even though his assets may be situate in another
division. This it did by referring in sec 149(1) not only
to the debtor but to
his estate.
(c)
Confirmation of a restrictive
interpretation to
14/
14. sec 149 and the old
sec 150 is to be found in a line of cases which decide that the jurisdiction
conferred by these sections relates
only to sequestration proceedings (
Ex
parte Bobert
1926 WLD 104
at 105;
Ex parte Human
1927 WLD 286
; Ex
parte Merchants' Trust Ltd
1929 WLD 196
at 198 and
Ex parte
Coetzee
1940 TPD 35
at 37; but compare
Ex parte Katzen
1937 NPD 61).
The rule that only the division of the Supreme Court which made the order for
seguestration has (subject to certain exceptions) jurisdiction
to grant the
insolvent's rehabilitation, is a special one which is not based on these
sections (see Pollak:
The South African Law of Jurisdiction
, 143). Nor do
I think that LUDORF J's statement in
Goode, Durrant and Murray (SA) Ltd and
Another vs Lawrence
1961(4) SA 329 (W) at 331 A, that the moment an order
for sequestration is granted, the court granting the order is vested with
15/
15. jurisdiction in regard to everything that follows upon the order,
supports the appellant's argument. The learned judge's somewhat
widely worded
observation must be read in context. At 330 in
fin
,
Bobert's
case
is referred to and relied on. So he could not have intended to disagree with it.
The guestion whether sec 149 confers jurisdiction
over a third party was not in
issue. Insofar as
Consolidated Caterers Ltd vs Patterson NO
1960(4) SA
194(E) at 197 H -198 A decides that the section does confer such jurisdiction,
it should not be followed. (d) In the light
of the concluding part of the def
inition of "Court" in sec 2, a claim to recover an improper disposition brought
in a magistrates
court attracts the ordinary rules of jurisdiction. The effect
of the appellant's argument is that where action is brought in the
16/.....
16. Supreme Court, the position is different. This would be anomalous. Moreover,
I cannot conceive of any particular considerations
of convenience to the trustee
which in a case of this kind (a claim sounding in money) ought to be taken into
account in interpreting
sec 149(1) in the way contended for. The present claim
is, in this regard, no different from any ordinary debt due to the estate
and
which the trustee might (in terms of sec 77 of the Act) have to sue for. This
would, of course, be in the defendant's forum.
The
court a
quo
also found that property improperly disposed of by a debtor
prior to his sequestration only becomes part of his insolvent estate
after the
disposition has been set aside by the court. This was held to be a further
reason why sec 149 could not
17/
17.
be relied on by the appellant; the action would not be in
regard to the
insolvent's estate. I would prefer to leave
this point open. But on the basis
of what has been
stated, I am of the opinion that McCALL J correctly held
that the jurisdictional criteria referred to in sec 149(1)
do not
determine what court has jurisdiction in terms of
sec 26(1) to set aside a disposition not made for value;
jurisdiction in
such a case is governed by ordinary
principles. This disposes of the argument under
consideration. In the
result it is unnecessary to decide
whether McCALL J was correct in holding
that the
jurisdictional provisions of these sections do not in any
event apply to the case of a company.
The appellant advanced a second argument in
support
of the exception. It was based on sec 12(1) of
the Companies Act. It provides:
"The Court which has jurisdiction under this Act in respect of any company or
other body
18/
18.
corporate, shall be any provincial or local division of the Supreme Court of
South Africa within the area of the jurisdiction whereof
the registered office
of the company or other body corporate or the main place of business of the
company or other body corporate
is situate."
The
contention was that the appellant's claim was one under
the Companies Act; it
was in respect of the company which
he represented; such company was one
within the meaning of
"any company" as used in sec 12(1); seeing that it had
been wound up by
the Durban and Coast Local Division, it
was to be inferred that its
registered office or main place
of business was within that court's area of
jurisdiction;
accordingly such court had jurisdiction under the
section.
The argument is misconceived and must be rejected.
Jurisdiction
means the power or competence of a court to
hear and determine an issue
between parties (
Graaff-Reinet
Municipality vs Van Ryneveld's ,Pass
Irrigation Board
1950(2) SA 420(A) at 424). Or, according to old authority
quoted by VAN
DER RIET AJP in
Wriqht vs Stuttaford and Co
19/
19.
1929 EDL 10
at 42, jurisdiction is "a lawful power to
decide something in a case, or to adjudicate upon a case, and to give effect to
the judgment,
that is, to have the power to compel the person condemned to make
satisfaction". This is the sense in which the word is used in sec
12(1). It
relates to the territorial competence of the various provincial and local
divisions of the Supreme Court to entertain legal
proceedings under the Act "in
respect of any company". In accordance with principle such company is the one
against which relief
is claimed and whose registered office or main place of
business is being referred to. It is not, as the appellant would have, the
insolvent company on whose behalf relief is sought.
The substance of the
appellant's third and final argument (advanced in the alternative) was that the
court a
quo
had jurisdiction at common law. It was founded on sec
19(1)(a) of the Supreme Court Act, 59 of 1959. This
20/
20.
section confers jurisdiction on a provincial or
local
division
inter alia
"in relation to all
causes
arising...within its area of jurisdiction..." A cause is
said to have arisen in the area of a court's jurisdiction
if at common law that court is regarded as the proper forum
(
Bisonboard Ltd vs K Braun Woodworking Machinery (Pty) Ltd
1991(1) SA 482(A) at 486 C-J). The common law
ratio
iurisdictionis
relied on was that the appellant's cause of
action arose within the area of jurisdiction of the Durban
and Coast Local Division. I understood the contention to
be that such cause of action consisted of the fact of the
company having been wound up; and that seeing the winding
up order was granted by the Durban and Coast Local
Division, it had jurisdiction (at common law). This
argument, too, must fail. Cause of action includes every
fact which is material to be proved to entitle a plaintiff
to succeed in his claim (
Evins vs Shield Insurance Co Ltd
1980(2) SA 814(A) at 838 G). I do not propose to analyse
what exactly constitutes a cause of action in terms of sec
21/
21. 26(1). Clearly it would include the seguestration order.
But it is not confined to this. The fact of a disposition having been
made (and
that it was not f or value) is also part of the cause of action. In
casu
,
the appellant alleges such a disposition in his summons, namely the payment of
R325,523.00 to the respondent. But there is no indication
of where such payment
occurred. As I have said, the special plea alleges that the appellant's cause of
action did not arise within
the jurisdiction of the Durban and Coast Local
Division. For the purposes of the exception, the correctness of this allegation
must
be accepted. The appellant has therefore not established that his cause of
action arose within that court's jurisdiction.
The result is that the appeal is dismissed with costs.
NESTADT, JA
HOEXTER, JA )
VIVIER, JA ) CONCUR
MILNE, JA ) GOLDSTONE, JA )