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1990
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[1990] ZASCA 85
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Incledon (Welkom) (Pty) Ltd. v Qwaqwa Development Corporation (480/88) [1990] ZASCA 85; 1990 (4) SA 798 (AD); [1990] 2 All SA 561 (A) (7 September 1990)
IN THE SUPREME COURT OF SOUTH AFRICA
(
APPELLATE
DIVISION
)
CASE NO:
In the appeal of
INCLEDON (WELKOM) (PTY) LTD
APPELLANT
and
QWAQWA DEVELOPMENT CORPORATION LTD
RESPONDENT
Coram
: HOEXTER, VAN HEERDEN et MILNE JJA; NICHOLAS et GOLDSTONE
AJJA
Date heard: 23 August 1990
Date delivered: 7 September 1990
2 JUDGMENT
GOLDSTONE
AJA:
On 5 June 1987 the liquidator of Maree and Blignaut Meubelfabrikante (Edms)
Bpk (the company) filed his second and final liquidation
and distribution
account. Encumbered asset account No 8 reflected the payment to the liquidator
of an amount of R139 643 from the
Board for the Decentralisation of
Industrý. That Board makes payment of concessions to persons who qualify
therefor by establishing
industries in the Black National States. The aforesaid
amount related to the con-cessions which had been granted to the company by
that
Board and which will be referred to as "the concessions". After
3 deducting
certain costs and expenses, the liquidator awarded the balance of R124 325.58 to
Incledon (Welkom) (Pty) Ltd ("Incledon")
in respect of Claim No 71. Qwaqwa
Development Corporation Ltd ("QDC") objected to that award and claimed that the
concessions should
have been used for the payment,
inter alia
, of its own
claims, Nos 5 and 7, in the amounts of R50 000 and R51 761.67 respectively. This
objection was dismissed by both the
liquidator and the Master of the Supreme
Court in Bloemfontein. The QDC then applied to the Orange Free State Provincial
Division
for the review of the decision of the Master. That application
succeeded with costs and the liquidator (who was the second respondent
in the
Court
a quo
) was ordered to frame the account in the terms sought by the
QDC. With leave of the Court
a quo
Incledon now appeals to this Court
against the judgment and order.
On 30 March 1983 the company became entitled to receive the
4 concessions.
On 28 April 1983 it entered into a written agreement with the Corporation for
Economic Development (the CED) in terms
of which the company ceded to the CED
the company's
"right, title and interest in and to any concessions granted or to be granted to
it by the Board for the Decentralisation of Industry
as security for the
fulfilment of its obligations in terms of any agreement entered into or wkich
may be entered into by and between
the Cedent and the
Cessionary."
I shall refer to this cession as "the
CED cession".
Also on 28 April 1983, the CED and the company entered into a written
agreement of loan. In terms thereof the CED undertook to lend
and advance to the
company the amount of R60 000. It was to be repaid in 60 equal instalments of
R1000 each,
5 commencing on the last day of the twelfth month following the
date on which the amount was advanced to the company. It does not
appear from
the papers when the amount of the loan was advanced by the CED to the company or
when and what repayments were made by
the company. All that appears from the
record is that in terms of the second and final liquidation account, dated 5
June 1987, the
total claim of the CED was reflected in the amount of R63 883,98.
Of that amount the sum of R37 977,05 was treated as a prêferred
or secured
claim. A further preferent dividend in the account was reflected in the amount
of R2415,61 making a total dividend of
R40 392,66. The shortfall was reflected
in the amount of R23 491,32. It appears from a letter addressed by the QDC's
attorneys to
the Master, dated 25 November 1987, that the security of the CED
which was relied upon by it and recognised by the liquidator was
the CED
cession.
6 On 6 May 1983 the company entered into a second agreement of
cession, this time with Incledon. It ceded
"all claims of whatsoever nature and description and howsoever arising which
I/we may now or at any time hereafter have against all
and any persons,
companies, corporations, firms, partnerships, associations, syndicates and other
legal personae whomsoever and whatsoever...
as continuing covering security for
the due payment of every sum of money which may now or at any time hereafter be
or become owing
by me/us to the Creditor (Incledon) from whatsoever cause or
causes arising and for the due performance of every other obligation
howsoever
arising which I/we may now be or become bound to perform in favour of the
Creditor."
7 I shall refer to this cession as "the
Incledon cession". It is upon this cession that Incledon relies for the
preference claimed
by it.
On 8 March 1985 the company executed a third cession, this one in favour of
the QDC. In terms thereof it ceded to the QDC
"enige and alle regte... wat Maree en Blignaut van die Desentralisasieraad in
enige voormelde konsessie mag ontvang in die bedrag
van R128
040.00."
I shall refer to this cession as "the QDC
cession". It was
to serve as security for the payment of moneys advanced
or
to be advanced by the QDC to the company. The QDC relies
upon both the
CED cession and the QDC cession for the preference
claimed by it in respect
of claims Nos 5 and 7.
8
The CED (formerly known as "The Black Investment Corporation of South Africa
Limited") was incorporated in terms of section 22 of
the Promotion of Economic
Development of National States Act, 46 of 1968 ("the Act"). In terms of section
5A(1)(b) of the Act the
State President was authorised, by proclamation in the
Government Gazette, to disolve the CED and
"regulate matters relating to the assets, liabilities, rights and obligations of
the (CED)".
In terms of that section of the Act, on
12 June 1987 Proclamation R93 was published in Government Gazette No 10765.
Paragraphs (a),
(b), (c) and (e) thereof are now relevant and read as
follows:
"(a) the Corporation for Economic Development, Limited
9 shall be dissolved with effect from 1 July 1987 (the fixed date);
(b) the assets, liabilities, rights and obligations of the Corporation for
Economic Development, Limited shall pass or be deemed to
have passed to the
bodies, corporations or development corporations mentioned in Schedule 1,
subject to the conditions agreed upon
between the bodies, corporations or
development corporations and the Corporation for Economic Development, Limited,
or under cessions
accepted by any of the bodies, corporations or development
corporations: Provided that shares held by the Corporation for Economic
Development, Limited in a development corporation established in respect of a
self-governing territory, shall pass to the South African
Development Trust;
10
(c) a reference to the Corporation for Economic Development,
Limited in any agreement, legal document, licence, permit, permission,
certificate or other document shall be deemed to be a reference to the body,
corporation or development corporation to which the
assets, liabilities, rights
and obligations of the Corporation for Economic Development, Limited have passed
in terms of paragraph
(b);
(e) the Minister of Education and Development Aid or any other person
authorised by him for that purpose may, at any time after the
fixed date, sign
any document or perform any other act relating to the passing of the assets,
liabilities, rights or obligations
referred to in paragraph (b) in the place of
the Corporation for Economic Development, Limited."
11
The QDC is one of the development corporations referred to in Schedule 1 to
the proclamation.
Counsel debated the meaning and effect of these provisions of the
proclamation. In the view which I take in this appeal it is not
necessary to
express a firm view in this regard. I shall assume, in favour of the QDC, that
the effect of the provisions was to transfer
to it, on 1 July 1987,
ipso
iure
, all of the assets and rights of the CED which, by informal agreement
during 1983, had been administered by it. During that year
the Government
decided to decentralise the activities of the CED and it arranged for regional
development corporations to take over
those activities. One of those regional
corporations was the QDC. In effect the QDC acted in Qwaqwa as if the relevant
rights and
obligations of the CED had been transferred to it. Concessions from
the Board for the
12 Decentralisation of Industry which had been ceded to the
CED were collected by the QDC after 1 November 1983. Those amounts included
the
concessions which had been ceded to the CED in terms of the CED cession. For
this reason the learned Judge
a quo
came to the conclusion that the
respondent was entitled to a preference in respect of its claims Nos 5 and 7 on
the strength of the
CED cession. I do not agree with that conclusion.
It is true that if one substitutes the name of the QDC for the name of the
CED in the CED cession the literal conseguence is that
the concessions become
security for the fulfilment of obligations in terms of any agreement between
"the Cedent and the Cessionary",
ie. the company and the QDC. On a less literal
interpretation the effect of the Proclamation upon the CED cession was that it
became
effective as a security in favour of the QDC in respect only of amounts
which were
13 which became owing by the company in terms of its original
obligations to the CED. The literal interpretation would be very far-reaching
indeed and would have imposed a most prejudicial obligation upon the company
without its consent. The Proclamation should not be
interpreted so as to
prejudice third parties in the absence of clear and unambiguous language
compelling that consequence. The proclamation
is reasonably and logically
capable of being read as having the less far-reaching effect and that is the way
in which, in my judgment,
it should be understood.
In any event, in my opinion, the proclamation, published after the date of
liquidation of the company, did not affect the rights of
creditors as at the
date of liquidation, ie. 17 April 1985. The effect of the liquidation was to
establish a
concursus creditorum
and
"... nothing can thereafter be allowed to be done by any
14 of the creditors to alter the rights of the other creditors."
Per Lord de Villiers CJ in
Walker v Syfret N.O
1911 AD 141
at 160. In
the same case, Innes JA, after stating that a sequestration order crystallises
the insolvent's position, went on to say:
'the hand of the law is laid upon the estate, and at once the rights of the
general body of creditors have to be taken into consideration.
No transaction
can thereafter be entered into with regard to estate matters by a single
creditor to the prejudice of the general
body. The claim of each creditor must
be dealt with as it existed at the issue of the order."
See
Ward v Barrett NO and Another
1963 (2) SA 546
(A) at 552
15 C -
G. As between the estate and the creditors and as between the creditors
inter
se
their relationship becomes fixed and their rights and obligations become
vested and complete.
There is a presumption in our law that legislative provisions do not
interfere with completed transactions or vested rights. In
Curtis v
Johannesburg Municipality
1906 TS 308
at 311, Innes CJ said:
"The legislature is virtually omnipotent, but the courts will not find that it
intended so inequitable a result as the destruction
of existing rights unless
forced to do so by language so clear as to admit of no other
construction."
In Steyn,
Die Uitleg van
Wette
, 4ed at 85, with regard to
the presumption against retrospectivity one reads the following:
16
"Hierdie vermoede bring mee dat ook waar 'n wet
retrospektief is, sy terugwerking nie verder erken
word as wat die
duidelike bedoeling van die wetgewer
gaan nie. By die vasstelling van die
mate waarin
h wet retrospektief is, word 'n strenge uitleg gevolg.
In
R v Ah Koon
1927 TPD 969
word bepaal dat 'a Court
will not give
greater retrospective operation to
an Act than its language renders
necessary', terwyl
in
Njobe v Njobe & Dube NO
1950 4 SA 545
(C) 552
in verband met
'n terugwerkende proklamasie gesê
word: 'If, because of its inept
wording, the
Proclamation leaves in doubt the nature and extent
of its
retrospective effect, then so much of the
previously existing legal position
as is not clearly
and unambiguously affected by the amending
Proclamation,
must be treated as unaffected thereby.'"
17
See, too:
Adampol (Pty) Ltd v Administrator, Transvaal
1989 (3) SA 800
(A) at 807 F - 808 I and 809 G - J.
The proclamation does not in express terms purport to affect completed
transactions or vested rights and I can find no reason for
giving it that
effect. In this regard there would be no warrant, for example, for reversing the
very awards made in favour of the
CED and deeming them to have been made in
favour of the QDC. No doubt, payment thereof was made by the liquidator some
considerable
time prior to the proclamation. For these reasons, the provisions
of the proclamation cannot assist the QDC.
The learned Judge held, further, that the CED cession was
an out-and-out
cession and that, therefore, on the date of
the Incledon cession there was
nothing left to cede to Incledon.
18
This finding was not supported before this Court by
counsel
for the QDC, and correctly so. In express terms, the CED
cession was one
in securitatem debiti
. For some years there
was
confusion concerning the precise nature and legal effect
of such a cession.
Much has been written on that subject
and I shall not burden this judgment
with a reference to those
writings. Suffice it to say that in three
considered judgments
of this Court, in recent years, it was held that a
consequence
of a cession of an incorporeal right
in securitatem
debiti
is that ownership of the right remains vested in the
cedent:
Leyds NO v Noord-Westelike Kooperatiewe
Landboumaatskappy
Bpk en Andere
1985 (2) SA 769
(A) at 780 A - G;
Marais en
Andere NNO v Ruskin NO
1985 (4) SA 659
(A) at 669 I -
670
A; and
Bank of Lisbon and South Africa Ltd v The Master
and
Others
1987 (1) SA 276
(A) at 291 H - 294 F. When the
company
executed the CED cession, it thus retained the ownership pf
its rights against the Board for the Decentralisation of Industry
19
in respect of the concessions. That ownership, as appears from the
authorities, consists in a reversionary interest which entitles
the owner
(cedent) to claim the re-cession of the rights upon payment of the indebtedness.
That personal right of action against
the cessionary has a value and is capable
of cession:
Bank of Lisbon and South Africa Ltd v The Master and Others
(
supra
) at 294 G - H.
In clause 10 of the Incledon cession there is express reference to the
reversionary right. One reads there that:
"10. I/We, warrant to the Creditor that I/We have not ceded to anyone else all
or any of the amounts which are now or will hereafter
become owing to me/us by
my/our debtors and I/we agree, without prejudice to anything hereinbefore
contained, that should it nevertheless
transpire that I/we
have
20
at any time ceded or otherwise disposed of the right, title and interest in and
to any of the debts which will from time to time
be the subject of this cession,
theh this pledge and cession shall operate as a cession of all my/our remaining
right, title and
interest in and to such debts, including all my/our rights of
action whatsoever against any prior cessionary, pledgee or other holder
of such
debts for the time being."
Why only portion of the
CED's claim against the company was treated as preferent does not emerge from
the record. However, once its
claims were admitted by the liquidator and its
preference under the CED cession recognised and given effect, the reversionary
right
of Incledon under the Incledon cession became effective and was correctly
so regarded by the liquidator.
21 Finally, it is necessary to consider the
submission on behalf of the QDC that the Incledon cession fell to be rectified
because
it was not intended by the parties thereto to apply to the concessions.
Apart from the fact that this argument was not advanced in
the Court
a
quo
, in my opinion, there is no factual basis to support it.
Mr Heyns, the officer of Incledon who negotiated the Incledon cession stated
in his affidavit that:
"Whilst it may be correct that I did not specifically reguire a cession of
Decentralisation benefits of concessions (sic), the existence
of this source of
income was known and appreciated by me."
Mr Heyns
referred to the fact that a standard form of cession was used by Incledon. In
his evidence during an enguiry held
22
in terms of the provisions of the Insolvency Act, Heyns
said
that he was prepared to take a second cession of the concessions.
I
assume he meant that Incledon was prepared to rank after
the CED in respect
of the concessions. In my opinion the
provisions of clause 10 of the Incledon
cession are not
inconsistent with such an intention. On behalf of the
QDC
there is the evidence of Mr Blignaut, who was one of the
signatories
of the cession. He stated that the Incledon cession
was intended to cover
only trade debts and was not intended
to include the concessions. However,
there was a second
signatory on behalf of the company, one Maree, and there
was
no evidence from him placed before the Court
a quo
. The onus
of
proving that the written cession by reason of a common
error did not reflect
the true intention of the parties thereto
rested upon the QDC. At best for it
there was a substantial
and material dispute of fact. There was no suggestion
made
in the Court
a quo
or before this Court that there should
23
be a reference of the matter to evidence. The onus of proof which rested upon
the QDC was clearly not discharged by it.
It follows that the liquidator properly dealt with the matter upon the basis
that Incledon ranked after the CED and prior to the QDC
in respect of the
security afforded by the cessions of the right of the company to the
concessions. Accordingly, the appeal must
succeed. The following order is
made:
1.
The appeal is upheld with
costs.
2.
The order of the Court
a quo
is set aside and replaced
by an order dismissing the
application with costs, including the costs occasioned by the employment of two
counsel.
24
R J GOLDSTONE
HOEXTER JA )
VAN HEERDEN JA ) CONCUR
MILNE JA )
NICHOLAS AJA )