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[1993] ZASCA 46
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De Leef Family Trust and Others v Commissioner for Inland Revenue (562/91) [1993] ZASCA 46; 1993 (3) SA 345 (AD); [1993] 2 All SA 288 (A) (31 March 1993)
CASE NO 562/91
THE DE LEEF FAMILY TRUST
First Appellant
ERNEST
ARMANDT DE LEEF.
Second Appellant
THE JACOBS FAMILY TRUST
Third Appellant
MARCUS
SONNY JACOBS
Fourth Appellant
THE COMMISSIONER FOR INLAND REVENUE
Respondent
JOUBERT, A C J:
IN THE SUPREME COURT OF SOUTH
AFRICA
APPELLATE DIVISION
In the matter between:
THE DE LEEF FAMILY TRUST
First Appellant
ERNEST ARMANDT DE LEEF
Second
Appellant
THE JACOBS FAMILY TRUST
Third Appellant
MARCUS
SONNY JACOBS
Fourth Appellant
and
THE COMMISSIONER FOR INLAND REVENUE
... Respondent
Coram
: JOUBERT A C J et SMALBERGER J A et
NICHOLAS HOWIE KRIEGLER A J J A.
Heard
: 5 March 1993
Delivered
: 31 March 1993
JUDGMENT JOUBERT
, A C J:
/2
2
In motion proceedings instituted by the Appellants
in the Transvaal Provincial Division against the Respondent (the "Commissioner")
for certain declaratory orders regarding the levy of transfer duty VAN DER WALT
J dismissed them, holding that transfer duty was
payable by the Second Appellant
("De Leef") and the Fourth Appellant ("Jacobs"). VAN DER WALT J refused the
appellants leave to appeal
against his judgment. The appellants were granted
leave in terms of sec 20(4)(b) of Act 59 of 1959 to appeal to this
Court.
The material background facts to the present appeal may conveniently be
summarized as follows: 1. Longterm Investments (Pty) Ltd (the
"Company") was the
registered owner of a certain immovable property (the "fixed property") situated
in the Municipality of Maimer,
Division of Port Elizabeth. It was the only asset
of the Company. De Leef and Jacobs each held 50% of its shares and were also its
only directors.
3
2. At a general meeting of the shareholders on 3 April 1983
it
was resolved by special resolution in terms of sec
349 of the
Companies Act 61 of 1973 that the Company be
be wound up
voluntarily. According to sec 350 this
was a members' voluntary
winding-up of the Company.
One Lewis Snitcher was nominated as liquidator of the Company.
3. On 4 May 1983 the special resolution was registered by the Registrar of
Companies in accordance by the provisions of sec 200, and
thereupon the Company
was placed in voluntary winding-up by its members (sec 350(1) Of Act 61 of
1973).
4. On 14 June 1983 the Master's Office at Cape Town, issued a certificate of
appointment as liquidator to Lewis Snitcher (sec 375(1)
of Act 61 of
1973).
5. On 8 December 1983 the Master's Office at Cape
Town
issued a certificate of registration to the
Third
Appellant (the"Jacobs Family Trust") which was
created
4
by a Deed of Trust executed on 18 November 1983.
6. On 16 April 1984 the Master's Office at Cape Town issued a certificate of
registration to the First Appellant (the "De Leef Family
Trust") which was
created by a Deed of Trust executed on 27 March 1984.
7. On or about 4 May 1984 according to para 9 of De Leef's founding
affidavit oral agreements were entered into between De Leef and
the Trustees of
the De Leef Family Trust, and also between Jacobs and the Trustees of the Jacobs
Family Trust "in terms whereof we
each ceded to the First and Third Applicants
respectively all our rights as shareholders, including
the right to
liquidation distributions and our right to take transfer of the said
property
. The terms thereof were duly communicated to the said Lewis
Snitcher, who accepted the said agreements and gave effect to them."
(My
underlining). In para 5 of his replying affidavit De Leef added an additional
averment that the De Leef
5
Family Trust and the Jacobs Family Trust purchased
those ceded rights from him and Jacobs respectively by crediting them in their
books of account each in the sum of R275 000-00 as loans payable on demand. What
this averment amounts to in law is that the
causa
of each cession was a
sale. 8. On 10 May 1984 Lewis Snitcher signed a power of attorney for the
purpose of passing transfer of the
fixed property to the Trustees of the De Leef
Family Trust and of the Jacobs Family Trust. This power of attorney recorded the
causa
for the registration of transfer as follows:
"The above property is awarded to the abovementioned Transferees in terms
of a
liquidation dividend dated the 4th May, 1983 at a valuation of R550
000-00
." (My underlining). It is self-evident from the aforegoing facts that
no
6
liquidation dividend was declared prior to 10 May
1984. Moreover, the De Leef Family Trust and the Jacob Family Trust were not in
existence on 4 May 1983 since they were created on 27 March 1984 and 18 November
1983 respectively.
9. As appears from transfer duty receipt No 7069, issued on 24 May 1984 by
the Receiver of Revenue at Cape Town, transfer duty in
the amount of R15 900-00
was paid by the De Leef Family Trust and the Jacobs Family Trust.
10. By Deed of Transfer No T 32616/84, dated 25 June 1984, Lewis Snitcher as
transferor transferred the fixed property to the Trustees
of the De Leef Family
Trust and of the Jacobs Family Trust as transferees. The
causa
for the
transfer was recorded as follows: "- - the above property was awarded to the
abovementioned Transferees in terms of a
liquidation dividend
at a
valuation of R550 000-00." In this way the fixed property was transferred
directly
to the De Leef Family Trust and the Jacobs Family Trust from the
Company (in
7
liquidation). There was no liquidation dividend
prior to 25 June 1984. In law a valid
causa
is not required for a valid
transfer of fixed property. See
Commissioner of Customs & Excise v
Randies, Brothers and Hudson Ltd
,
1941 AD 369
at pp 398-399, 411 and Van der
Merwe
Sakereg
, 2nd ed. p 305-314 for a full discussion. What is required
is evidence from which the transferor's intention to transfer ownership
(
animus transferendi dominii
) and the transferee's intention to acquire
ownership (
animus accipiendi dominii
) can be ascertained. This aspect
was, however, not raised on the papers in the present matter. 11. On 12 July
1984 liquidator Lewis
Snitcher signed his
affidavit in respect of his First and Final Liquidation and Distribution
Account from which it appears that there was a cash shortfall
of R3 959-12 which
he collected from De Leef and Jacobs. By doing so the realization of the fixed
property, the in order to pay
8
debts, was avoided. The Company (in liquidation)
was solvent. Its fixed property, valued at R550 000-00, was to be distributed in
specie
to De Leef and Jacobs as shareholders in equal shares. The true
factual position, however, was that liquidator Lewis Snitcher had
already on 25
June 1984 transferred the fixed property to the Trustees of the De Leef Family
Trust and of the Jacobs Family Trust.
12. On 25 October 1984 Jacobs acknowledged
in writing that he had received the sum of R250 000-00 from the Company (in
liquidation).
He also admitted that the payment was made to him prior to the
confirmation of the Liquidation and Distribution Account by the Master.
On 29
October 1984 De Leef made an identical acknowledgment in writing. Both written
acknowledgments alleged that the said sums of
money were received by them "on
account of the secured/preference
award
due to me/us."
9
13. On 30 October 1984 the Master in terms of sec 408 of Act 61 of 1973
confirmed the First and Final Liquidation and Distribution
Account.
14. On 17 July 1985 the Company was in terms of. sec 419(1) of Act 61 of
1973 dissolved.
The Court
a quo
held that De Leef
and Jacobs were liable for transfer duty. The
ratio decidendi
of the
judgment was that on 4 May 1983 when the Company was placed in voluntary
winding-up as a result of the registration of the
special resolution by the
Registrar of Companies (sec 200 of Act 61 of 1973), they acquired the right to
obtain transfer of the fixed
property upon confirmation of the liquidation and
distribution account. They could then claim from liquidator Lewis Snitcher
transfer
of the fixed property into their names. "This right they had acquired
and held since the 4th of May 1983".Let us now consider the
applicable
provisions of the
Transfer Duty Act No 40 of 1949
. Transfer duty has often been
said to be
10
rather a misnomer because the liability for it,
in respect
of land, does not arise on the date of transfer of land
but
on the date of acquisition of the right to acquire
ownership
thereof irrespective of whether or not the land
is
transferred into the name of the acquirer (subject
to
cancellation or dissolution of the transaction).
See
Jones Conveyancing in South Africa
by H S Nel, 4th
ed.,
1991 p 144 and the authorities there cited. The same
flaw, however, does not seem to attach to its Afrikaans
counterpart viz.
herereqte
. The relevant portion of sec
2(1), the charging section, reads as follows:
"Subject to the provisions of
section 9
, there shall be levied for the
benefit of the Consolidated Revenue Fund a transfer duty (hereinafter referred
to as the duty) on
the value of any property - - -
- - - - - - - - - - - - acquired by any person
by way of a transaction or in any other manner - - - -".
11
Sec 2(1)
must be read in conjunction with the
following pertinent definitions in
sec 1
, namely :
"Property" means land and any fixtures thereon - - - - -"
"Transaction" means any agreement whereby one
party
thereto agrees to sell, grant, donate, cede,
exchange, lease or otherwise dispose of property
to another - - - - - -"
"Date of acquisition" means -
(a) in case of the acquisition of property - - -by way of a transaction,
the date on which the transaction was entered into, irrespective
of whether the
transaction was conditional or not or was entered into on behalf of a company
already registered or still to be registered
and,
in the case of the
acquisition of property otherwise then by way of a transaction
,
the date
upon which the person who so acquired the property became entitled thereto
-
- - -." (My underlining). In
Commissioner for Inland Revenue v
Freddies
Consolidated Mines Ltd
, 1957(1) S A 306 (A) CENTLIVRES C
J
in construing Act 40 of 1949 held at p 311 B-C: "It is
12
clear from the whole scheme of the
Act that payment of the duty (apart from cancellation) must be made whether or
not the property
is transferred into the name of the purchaser. The word
'acquired' in the charging section (sec 2) must therefore be construed as
meaning the acquisition of a right to acquire the ownership of property". In
this connection the right to acquire the ownership of
land includes a personal
right to obtain
dominium
in immovable property (
ius in personam ad rem
acquirendam
). See
Secretary for Inland Revenue v Hartzenberq
, 1966(1)
S A 405 (A) at p 409 A-B and
Secretary for Inland Revenue v Estate Roadknight
and Another
, 1974(1) S A 253 (A). OGILVIE THOMPSON C J held at p 258 B-C :
"It is well established that the word 'acquired' in sec 2(1) of the
Act
ordinarily denotes, not ownership already obtained, but the acquisition of a
right to obtain
dominium
. The concept is sometimes expressed by saying
that 'acquired' includes the acquisition of a
jus in personam ad rem
acquirendam
". What
13
is required by sec 2(1) is that the
acquirer acquired a right to obtain the
dominium
of
land.
Furthermore, it is important to bear in mind when an
unconditional right vests in the holder thereof. It is trite law to draw a
distinction
between
dies cedit
, i.e. the time has come when the right is
due or owing, and
dies venit
, i.e. the time for enjoyment of the right
has arrived so that possession, delivery or transfer of its subject-matter may
be claimed.
Voet 36.2.1.,
Jewish Colonial Trust Ltd v Estate Nathan
,
1940
A D 163
at p 176. In the case of a conditional right or interest no vested right
is acquired prior to fulfilment of the condition.
As stated, De Leef and Jacobs each held 50% of the Company's shares. With
reference to shares it was held in
Randfontein Estates Ltd v The Master
,
1909 T S 978
per INNES C J at p 981-982:
"They are simply rights of action -
jura in
14
personam
- entitling their owner to a certain interest in the
company, its assets and its dividends. As between those in whose names they
are
registered in the books of the company, and any other person with whom the
registered holders deal, they may be freely assigned,
even though the original
registration remains unaltered, And that is the ordinary way in which such
shares are dealt with; they pass
from hand to hand, and form the subject of many
transactions without the original registration in the books of the company being
disturbed."
This Court has consistently
held a share in a joint stock company to be a
jus in personam
, the
ownership of which passes by cession in due form. See
Liquidators
,
Union Share Agency v Hatton
,
1927 A D 240
at pp 250, 251, 252, and
Jeffery v Pollak and Freemantle
,
1938 A D 1
at pp 14, 22, 28.
The nature of a share may be elaborated on by stating that it represents
a complex of rights and duties of a shareholder, including
the latter's right to
participate
15
in a distribution of the company's surplus assets
on its liquidation. (LAWSA, vol 4 s v
Companies
, para 37.) According to
Palmer's Company Law
, 25th ed 1992, vol 1 para 6.002 the principal rights
which a share may carry are:
"1. the right to
dividend
if, while the
company is a going concern, a dividend is declared;
2.
the right to
vote
at the meeting of members,
and
3.
the right, in the
winding up of the company, after the payment of debts to receive a proportionate
part of the
capital
or otherwise to
participate
in the distribution of assets
of the company."
See also Cilliers, Benade, Henning, Du Plessis and
Delport,
Corporate Law
, 2nd ed., 1992 para 14.10 :
"The share certificate on the other hand is a tangible document evidencing
the legal relationship between the company and the shareholder.
In his capacity
as a party to this legal relationship there accrue to the shareholder -(a)
rights
, mainly the right to dividends
when
16
they have been declared and the right to
participate in a distribution on liquidation; and (b)
duties
, mainly to
honour the provisions of the articles."
It follows from the aforegoing that when De Leef and Jacobs on 3 April
1983 at a general meeting of members adopted the special resolution
to wind up
the Company voluntarily they were the owners of their respective shares and that
they already had a vested right (
dies cedit
) to participate equally in
the distribution of the surplus assets of the company
on its liquidation
.
This vested right formed an asset in their private estates and was
transmissible.
Dies venit
, however, would occur only
after
confirmation of the liquidator's liquidation and distribution account by the
Master ( sec 408) when the liquidator was in terms of
sec 409 obliged to proceed
immediately with the distribution of the Company's surplus assets in accordance
therewith. After confirmation
of the liquidation and distribution account
they
17
would have enforceable
jura in
personam ad rem acquirendam
to obtain transfer of the fixed property in
their own names provided that it had not been realized to liquidate debts and
was available
for distribution..
The placing of the Company in winding-up by the registration of the
special resolution by the Registrar of Companies on 4 May 1983
set in motion the
voluntary winding-up procedure which is simpler and faster than other types of
winding-up. Such procedure is utilised
where the Company is solvent and is not
being dissolved because it is insolvent. It is subject to fewer statutory
limitations while
the rights of creditors are protected. No meetings of
creditors are held since the creditors have no say in the winding-up procedure.
The liquidator can be instructed by the members in general meeting. See
Cilliers, Benade, Henning, Du Plessis and Delport,
op.cit
., para 28.06.
The effect of the adoption of the voluntary winding-up procedure was that the
Company remained a corporate body and
18
owner of its assets, but the powers
of its directors (De Leef and Jacobs) ceased except in so far as their
continuance was sanctioned
by the liquidator or by the Company in general
meeting of its members (sec 353(1), (2)(b)). Moreover, any transfer of shares
without
the sanction of the liquidator would be void (sec 341(1)).
The Court
a quo
held that on 4 May 1983 (i.e. upon registration by
the Registrar of Companies of the special resolution to wind up the Company) De
Leef and Jacobs acquired "the right to obtain transfer of the property from the
company in liquidation upon confirmation of the liquidation
and distribution
account". (Record p 73). The Court
a quo
would seem to have found that on
the said date De Leef and Jacobs acquired
jura in personam ad rem
acquirendam
which brought them within the ambit of the charging sec 2(1) of
Act 40 of 1949 and accordingly rendered them liable for transfer
duty.
This conclusion of the Court
a quo
is, with
19
respect, untenable for the following reasons : 1.
I have already indicated
supra
that one of the rights appertaining to a
share is the shareholder's right in the winding-up of the company to participate
at some future date
in the distribution of the company's surplus assets.
Such a right vests (
dies cedit
) in the shareholder on obtaining ownership
of the share and is transmissible, but
dies venit
will occur only
after
confirmation of the liquidator's liquidation and distribution
account by the Master (sec 408) whereupon the liquidator should immediately
proceed in terms of sec 409 to distribute the surplus of the company's assets in
accordance therewith. It is only
after
confirmation of the liquidator's
liquidation and distribution account that
dies venit
occurs. That is when
the shareholder acquires the enforceable right to obtain transfer of immovable
property (
ius in personam ad rem acquirendam
). The shareholder will then
in
20
terms of sec 2(1) of Act 40 of 1949 be liable for transfer duty irrespective
of when transfer actually occurs.
2. There is in the present matter no juristic fact (regsfeit) or juridical
ground by virtue of which
dies venit
on 30 October 1984 in regard to
ius in personam ad rem acquirendam
could be antedated to 4 May 1983. Nor
is there any provision in Act 61 of 1973 which authorises such antedating to
determine when
dies venit
occurred.
3. Besides, according to our modern system of administration of deceased
estates the heir or legatee of an unconditional bequest obtains
a vested right
(
dies cedit
) to be entitled to the bequest on the death of the testator
(
a morte testatoris
). Such a right is transmissible but his claim is
enforceable
only at some future time
when the executor's liquidation and
distribution account has been confirmed (dies
venit).
21
He then has a enforceable right to claim payment, delivery or transfer of
his bequest (
ius in personam ad rem acquirendam
).
Estate Smith v
Estate Follett
,
1942 A D 364
at p 383,
Greenberg v Estate Greenberg
,
1955(3) S A 361(A) at p 364,
Secretary for Inland Revenue v Estate Roadkniqht
and Another
,
supra
. It is pointed out in
The Law of Succession in
South Africa
, 1980, by Corbett, Hahlo, Hofmeyer and Kahn, p 164 note 176,
that although these judgments speak of 'confirmation' of estate accounts
by the
Master no provision is made for confirmation, as such, in the Administration of
Estates Act 66 of 1965 ( (nor was there any
such provision in the previous Act
24 of 1913). It is suggested that 'confirmation' in the context should be taken
as a reference
to the fact that the accounts had lain for inspection, without
objection, for the statutory period. See also Meyorowitz in his
Law and
Practice of Administration of Estates
, 5th ed. p 261.
22
The legal principles of vesting are not afffected. I may add that the same
principles are
mutatis mutandis
applicable to the administration of an
insolvent estate by a trustee. See
secs 110
to
113
of the
Insolvency Act 24 of
1936
.
In the present matter De Leef and Jacobs had not
on 4 May 1983 obtained personal rights to acquire the ownership of the fixed
property
(
iura in personam ad rem acquirendam
).
Dies venit
had not
occurred. A year later (4 May 1984) by entering into the cessions with the
Trustees of the De Leef Family Trust and of the
Jacobs Family Trust they
divested themselves of their rights to take transfer of the fixed property.
Thereupon
dies venit
could not avail to vest in them the right to claim
transfer of the fixed property after confirmation of the executor's account
since
their rights had been ceded to the two Trusts. They had no
iura in
personam ad rem acquirendam
. De Leef and Jacobs did
23
not acquire
iura in personam ad rem
acquirendam
since they had ceded their rights and furthermore the Company
(in liquidation) had already on 25 June 1984 divested itself of the
fixed
property in favour of the two Trusts. The result is inescapable that De Leef and
Jacobs cannot be liable in terms of
sec 2(1)
of Act 40 of 1949 for transfer duty
inasmuch as they never obtained enforceable rights to acquire the ownership of
the fixed property
(
jura in personam ad rem acquirendam
).
In the result the appeal must succeed. The following orders are granted:
1. The appeal succeeds with costs.
2. The following order is substituted for the order of the Court
a
quo
viz.
(a) declaring that no further transfer duty is payable by any of the
applicants in relation to the transfer of two undivided equal
half shares in the
property to the First and Third Applicants
24
(b) costs of the application to be borne by the
Respondent.
C. P. JOUBERT A C
J.
SMALBERGER J A NICHOLAS A J A Concur. HOWIE A J A KRIEGLER A J A