Summary of Judgment

1. Introduction

The matter concerned an appeal to the Supreme Court of Appeal against an order of the Witwatersrand Local Division in motion proceedings. The appellants, C J Venter N.O. and R D du Plessis N.O., acted as co-curators in the insolvent estates of the Wilge Delta partnership and its former partners, P G B Koen and M J Koen. The respondent was R Carels, who was in possession of the motor vehicle forming the subject of the dispute.

The procedural history was that the appellants launched an application in the court a quo for the delivery (surrender) of a Volkswagen motor vehicle. The court a quo initially granted a rule nisi with interim relief authorising immediate surrender and seizure of the vehicle pending the return day. On the return day, the respondent opposed confirmation of the rule, relying on authority holding that section 84(1) of the Insolvency Act 24 of 1936 did not apply where the insolvent was not in possession of the movable property at sequestration. The court a quo considered contrary decisions persuasive but regarded itself as bound by the Transvaal decision and accordingly discharged the rule nisi with costs, granting leave to appeal.

The general subject-matter of the dispute was the effect of section 84(1) of the Insolvency Act on a movable sold under an instalment sale with reservation of ownership, where the insolvent buyer had already disposed of the movable before sequestration and it was held by a third party at the time of sequestration.

2. Material Facts

It was common cause that, before sequestration, the Wilge Delta partnership purchased a Volkswagen motor vehicle from Volkskas Bank under an instalment sale agreement in terms of which ownership was reserved to the seller until the final instalment had been paid.

At the time of sequestration, a substantial balance of the purchase price remained owing under the instalment sale agreement.

It was further common cause that, before sequestration, the partnership resold the vehicle. Following further resales, the vehicle ultimately came into the possession of the respondent. At the time of the sequestrations, the respondent was in possession of the vehicle, and the insolvent partnership was not.

The appellants relied on the proposition that, by operation of section 84(1), a form of security (described in the judgment as a tacit hypothec) was established in favour of the seller to secure the unpaid balance, with the consequential effect (as advanced by the appellants) that ownership vested in the curators, entitling them to reclaim the vehicle from the respondent.

No factual basis was laid in the answering affidavit for additional defences later sought to be advanced in argument, such as lack of bona fides in the initial sale or an estoppel against the curators.

3. Legal Issues

The central legal question was whether section 84(1) of the Insolvency Act 24 of 1936 applied in circumstances where the insolvent purchaser under an instalment sale agreement was not in possession of the movable property at the time of sequestration because it had been disposed of to third parties.

This issue was predominantly one of law, namely the proper interpretation and application of section 84(1), and specifically whether the section’s operation depended on the insolvent’s possession of the movable at sequestration.

A subsidiary issue of procedural and evidential character arose from the respondent’s attempt on appeal to raise additional defences (including an alleged lack of bona fides and estoppel) without those defences having been pleaded on the papers. This concerned the application of motion-proceedings principles to the record before the court, rather than a dispute of fact determined on evidence.

4. Court’s Reasoning

The Supreme Court of Appeal treated the matter as effectively governed by an intervening authoritative decision of the same court, namely Venter NO v Avfin (Pty) Ltd [1995] ZASCA 156; 1996 (1) SA 826 (A). In that decision, the Supreme Court of Appeal had already analysed the divergent approaches adopted in earlier provincial decisions and had concluded that the view favouring application of section 84(1) notwithstanding the insolvent’s lack of possession at sequestration was correct.

The court noted that the respondent’s opposition in the court a quo had rested exclusively on UDC Bank Ltd v Seacat Leasing and Finance Co (Pty) Ltd and Another 1979 (4) SA 682 (T), which held that section 84(1) did not apply where the insolvent was not in possession at sequestration. The Supreme Court of Appeal observed that other divisions had not followed that approach and had instead adopted the opposite view, as reflected in Hubert Davies Water Engineering (Pty) Ltd v The Body Corporate of “The Village” and Others 1981 (3) SA 97 (D) and Morgan en ’n Ander v Wessels NO 1990 (3) SA 57 (O).

The court explained that, although the court a quo had regarded the reasoning in Hubert Davies and Morgan as persuasive, it considered itself bound by UDC Bank. In light of Venter NO v Avfin, which rejected the reasoning in UDC Bank and endorsed the contrary line of authority, the Supreme Court of Appeal held that the decision of the court a quo could not stand. The court considered it unnecessary to revisit the detailed analysis because the point had already been resolved authoritatively.

As to the respondent’s attempt in argument to advance new defences—namely that the original sale by Volkskas Bank to the partnership was not bona fide and that the appellants were estopped from asserting ownership—the court rejected the attempt as misconceived. The court’s reasoning was that the respondent’s answering affidavit contained no factual allegations supporting such defences. In motion proceedings, defences must be grounded on the papers, and in the absence of a factual foundation they could not be entertained.

5. Outcome and Relief

The Supreme Court of Appeal upheld the appeal with costs.

It set aside the order of the court a quo and substituted it with an order confirming the operative parts of the rule nisi. The effect of the substituted order was that the respondent was directed to surrender the Volkswagen vehicle to the appellants, the Deputy Sheriff was authorised and directed to take possession of the vehicle wherever found and return it to the appellants, and the respondent was ordered to pay the costs of the application.

Cases Cited

UDC Bank Ltd v Seacat Leasing and Finance Co (Pty) Ltd and Another 1979 (4) SA 682 (T).

Hubert Davies Water Engineering (Pty) Ltd v The Body Corporate of “The Village” and Others 1981 (3) SA 97 (D).

Morgan en ’n Ander v Wessels NO 1990 (3) SA 57 (O).

Venter NO v Avfin (Pty) Ltd [1995] ZASCA 156; 1996 (1) SA 826 (A).

Legislation Cited

Insolvency Act 24 of 1936, section 84(1).

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The Supreme Court of Appeal held that the court a quo’s reliance on UDC Bank Ltd v Seacat Leasing and Finance Co (Pty) Ltd and Another 1979 (4) SA 682 (T) could not be sustained in light of the Supreme Court of Appeal’s intervening authoritative decision in Venter NO v Avfin (Pty) Ltd [1995] ZASCA 156; 1996 (1) SA 826 (A), which endorsed the contrary approach reflected in Hubert Davies Water Engineering (Pty) Ltd v The Body Corporate of “The Village” and Others 1981 (3) SA 97 (D) and Morgan en ’n Ander v Wessels NO 1990 (3) SA 57 (O).

It further held that additional defences sought to be raised by the respondent in argument, including alleged lack of bona fides in the initial sale and estoppel, could not be considered because they were not supported by any factual foundation in the respondent’s answering affidavit.

LEGAL PRINCIPLES

Section 84(1) of the Insolvency Act 24 of 1936 applies in accordance with the interpretation authoritatively adopted by the Supreme Court of Appeal in Venter NO v Avfin (Pty) Ltd [1995] ZASCA 156; 1996 (1) SA 826 (A), rejecting the approach taken in UDC Bank Ltd v Seacat Leasing and Finance Co (Pty) Ltd and Another 1979 (4) SA 682 (T) and endorsing the approach reflected in Hubert Davies Water Engineering (Pty) Ltd v The Body Corporate of “The Village” and Others 1981 (3) SA 97 (D) and Morgan en ’n Ander v Wessels NO 1990 (3) SA 57 (O).

In motion proceedings, a party cannot successfully advance defences in argument that are not pleaded or supported by factual allegations in the affidavits; absent a factual foundation on the papers, such defences are not entertained.