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1995
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[1995] ZASCA 122
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Cohen NO and Others v SAPHI (Pty) Ltd. (103/94) [1995] ZASCA 122 (29 September 1995)
Case No 103/94 /MC
IN THE SUPREME COURT OF SOUTH AFRICA (APPELLATE DIVISION)
In the matter between
LESLIE COHEN NO First Appellant
REGINALD BARRY PROSCH NO Second Appellant
LESLIE COHEN NO Third Appellant
REGINALD BARRY PROSCH NO Fourth Appellant
and
S A P H I (PROPRIETARY) LIMITED Respondent
CORAM: Joubert, Vivier, Van den Heever, Olivier JJA et
Van Coller AJA.
HEARD: 14 September 1995.
DELIVERED: 29 September 1995.
JUDGMENT
2
VIVIER JA:
The appellants are the joint liquidators of two companies in
liquidation, Projec Investment Holdings Ltd ("Projec") and Canvacor (Ladismith)
Pty Ltd ("Canvacor"), which companies were wound up by the Court on 7 August
1990, the applications for their winding-up having been
presented to the Court
on 15 June 1990. In their capacities aforesaid the appellants instituted action
in the Transvaal Provincial
Division for an order declaring the sale to
respondent prior to liquidation of a certain business and the goodwill, goods
and property
forming part thereof ("the business") to be null and void in terms
of
sec 34
(1) of the
Insolvency Act 24 of 1936
("the
Act") as
it read prior to
its amendment by
sec 1
(a) of Act 6 of 1991, as read with sec 340 (1) of the
Companies Act 61 of 1973, and for an order restoring the business to the
appellants.
3
The business was sold in terms of a written contract concluded between
Projec, Canvacor and African Oilskin Industries (Pty) Ltd as
sellers, and the
respondent, as purchaser. It was signed by the parties thereto on 6 December
1989 and provided that notwithstanding
the date of signature the effective date
would be 16 December 1989.
In the particulars of claim it was alleged that the business belonged to
Projec, a trader; that pursuant to the said contract the
business was delivered
to the respondent on 16 December 1989; that such delivery constituted a
disposition in terms of sec 34 (1)
of the Act; that such disposition was not
made in the ordinary course of that business; that at no time did Projec publish
a notice
of such intended disposition in the Gazette and the press as is
required by sec 34 (1) of the Act, as read with sec 340 (1) of the
Companies
Act, 1973 and that Projec was unable to pay its debts.
4
It was alleged that the disposition was therefore void in terms of these
provisions. In the alternative identical allegations were
made, and relief
sought, in regard to Canvacor. It is thus only necessary to refer to the
appellants' case in respect of Projec.
An exception that the particulars of
claim lacked averments necessary to sustain the action was taken and Spoelstra J
allowed the
exception with costs. With the necessary leave the appellants appeal
to this Court against the decision of Spoelstra J.
The sole issue raised by the appeal is when the disposition for purposes of
sec 34 (1) was made. It was contended on behalf of the
respondent that it was
made when the contract was concluded, ie on 6 December 1989. On behalf of the
appellant it was contended that
both the contract and the delivery constituted
dispositions within the meaning of sec 34 (1) of the Act and that the latter
disposition
was void as against the appellants as having
5
been made within a period of six months of the liquidation.
In applying
the provisions of sec 34 of the Act to the winding-up of a company unable to pay
its debts, the date the application for
the winding-up is presented to the Court
is in terms of sec 340 (2) (a) of the Companies Act, 1973 deemed to correspond
with the
date of sequestration. In the present case that was 15 June 1990. This
means that if the date of the disposition was 6 December 1989
it was not
affected by sec 34 (1) of the Act as more than six months elapsed after the
disposition and before the liquidation, whereas
if the date of the disposition
was 16 December 1989 it was within six months of Projec's liquidation and
therefore void in terms
of sec 34 (1) of the Act. In the alternative counsel for
the appellants contended that if the sole disposition for purposes of sec
34 (1)
of the Act was made when the contract was concluded, the contract, on a proper
interpretation
6
thereof, was concluded on 16 December
1989.
Sec 34
(1) of the Act, prior to its amendment in 1991,
provided
as follows :
"If a trader disposes of any business belonging to him, or the goodwill of such
business or any goods or property forming part thereof
(except in the ordinary
course of that business) and such trader does not publish a notice of such
intended disposition in the Gazette,
and in two issues of an Afrikaans and two
issues of an English newspaper circulating in the district in which that
business is carried
on, within a period not less than thirty days and not more
than sixty days before the date of such disposition, the said disposition
shall
be void as against his creditors for a period of six months after such
disposition, and shall be void against the trustee of
his estate, if his estate
is sequestrated at any time within the said period."
Sec 2 of Act
27 of 1987 amended only the English version of the Act, substituting the words
"disposes of" and "disposition" in subsections
(1) and (3) of sec 34 for
"alienates" and "alienation". In the Afrikaans version of the Act, which is
the
7
signed one, the words "vervreem" and "vervreemding" are used. These latter
words are defined in terms identical with the definition
of the word
"disposition" whereas the words "alienates" and "alienation" are not defined at
all. The 1987 amendment removed the difficulty
caused by the use of the words
"alienates" and "alienation" which have a narrower meaning than "vervreem" or
"vervreemding" (Cronje
NO v Paul Els Investments (Pty) Ltd 1982(2) SA 179 (T) at
190 E-G).
In the context of impeaching a transaction in terms of sec 34 (1) a
"disposition" is defined in sec 2 of the Act as "any transfer
or abandonment of
rights to property and includes a sale, lease, mortgage, pledge, delivery,
payment, release, compromise, donation
or any contract therefor, but does not
include a disposition in compliance with an order of the court".
It has been held in decisions of this Court that, according
to
8
its definition the word "disposition" is wide enough to take the
form of
the conclusion of a contract providing for the delivery or
transfer of
property or the payment of money, and also the actual
physical transfer, delivery or payment itself. In National Bank
of SA Ltd v Hoffman's Trustee
1923 AD 247
at 251 Innes
CJ said that the almost identical definition of disposition in the
Insolvency Act 32 of 1916 included a contract for the transfer of
property as well as the transfer itself. In Estate Jager v
Whittaker and Another
1944 AD 246
at 250 Watermeyer
CJ said the following about the definition in the present Act :-
"This definition is important. It shows that a disposition may take the form
of a contract which creates rights and obligations and
may also take the form of
an alienation of property."
See also Langeberg Koöperasie Bpk v Inverdoom Farming
and Trading Company Ltd
1965 (2) SA 597
(A) at 601 G -
9
602 A and Klerk NO v Kaye
1989 (3) SA 669(C)
at 674 B - D. In the Langeberg
case, this Court (at 602 F - 603 C and 608 A - D) rejected an argument that the
words "or any contract
therefor" appearing at the end of the definition clause,
should be read as governing only the one word immediately preceding them,
namely
"donation" and held that these words govern all the transactions enumerated
therein and not merely the last of them.
The present contract is one for the
sale of a trader's business and the goodwill and goods forming part thereof. It
is subject to
a true suspensive condition created in clause 10.4 ie "the
approval of the Johannesburg Stock Exchange and Shareholders of the Seller".
Counsel for the appellant conceded, on the authority of Cronje v Paul Els
Investments (Pty) Ltd, supra, at 193 G -196 D that despite
the suspensive
condition the contract is included
10
in the definition of "dispose" in sec 2 of the Act as being a contract for a
sale. It is accordingly not necessary for present purposes
to decide whether the
contract is one of sale. According to Corondimas v Badat
1946 AD 548
at 558 a
sale subject to a suspensive condition is not a contract of sale until the
condition is fulfilled, although a binding legal
relationship is created in the
interim. Corondimas's case was followed by this Court in Soja (Pty) Ltd v
Tuckers Land Development
Corporation (Pty) Ltd
1981 (3) SA 314
(A) at 321 F-G
and was not departed from, although it was strongly critisized by this Court, in
Tucker's Land and Development Corporation
(Pty) Ltd v Strydom
1984 (1) SA 1
(A).
In Cronje's case the facts were that on 30 January 1980 the insolvent
concluded a written contract, subject to a suspensive condition,
for the sale of
his hotel business to the respondent. On
11
1 March 1980 the respondent took physical control of the business. On 26
August 1980 the insolvent's estate was provisionally sequestrated
and this order
was made final on 9 September 1980. The trustee of the insolvent estate applied
for a declaratory order that the contract
of sale was void in terms of sec 34
(1) of the Act in that the requisite notices had not been published. The
respondent made a counter-application
for a declaratory order that the contract
was valid. It was contended on behalf of the trustee that the disposition for
purposes
of sec 34(1) of the Act had taken place on 1 March 1980 which was
within the period of six months of the sequestration of the insolvent's
estate.
The Court (Ackermann J) held that a contract of sale subject to a suspensive
condition was a "vervreemding" ("alienation",
as the English version of sec
34(1) then read prior to the 1987 amendment) for the purposes of that
subsection.
12
The Court further held that such alienation had taken place when the contract
was concluded, ie on 30 January 1980; that the contract
was thus not affected by
the provisions of sec 34 (1) of the Act and that the counter-application should
succeed. The decision in
Cronje's case was approved by this Court in Vermaak v
Joubert and May
[1990] ZASCA 56
;
1990 (3) SA 866
(A) at 873 E where it was held (per Joubert JA)
that in a case of a contract of sale constituting a disposition within the
meaning
of sec 34 (1) of the Act the date of the disposition for purposes of
that subsection is the date upon which the contract was concluded.
Counsel for the appellant did not question the correctness of the decisions
in the Cronje and Vermaak cases, both supra. He submitted,
however, that in the
present case both the conclusion of the contract on 6 December 1989 and the
delivery on 16 December 1989 constituted
dispositions for the purpose of
13
sec 34 (1) of the Act. I do not agree. In my view there was only one relevant
disposition and that occurred when the contract was
concluded. The delivery was
no more than a legal incident of that disposition viz the performance of the
seller's obligation in terms
of the contract. In my view that was also the
effect of the judgments in the Cronje and Vermaak cases, both supra. Counsel
conceded
that if every delivery in a contract of sale were to be regarded as a
separate disposition, a multiplicity of successive dispositions,
each requiring
a notice in terms of sec 34 (1) with a fresh six-month period commencing to run
after each disposition, could result.
This would clearly be absurd and could
never have been intended by the Legislature.
Counsel for the appellant submitted that if the conclusion of the contract
and the subsequent delivery were not regarded as separate
dispositions, certain
creditors will lose their protection
14
under sec 34. Again I cannot agree. Sec 34 (1) does not oblige a trader
proposing to sell his business to advertise. It sets out what
the consequences
are, for the buyer and all the trader's creditors, if advertisements complying
with prescribed characteristics,
are not published. Subsections (2) and (3) deal
with special situations and do not detract from the generality of the provisions
of subsection (1). Subsection (2) accelerates payment of the trader's
liabilities and provides that upon publication of any notice
of intended
disposition every liquidated liability of a trader in connection with his
business becomes due forthwith provided only
that the creditor demands payment.
It clearly applies also to post-publication liabilities. Subsection (3) deals
with the situation
where a disposition is made after a creditor has instituted
court proceedings against a trader for the purpose of enforcing his claim
in
connection with the trader's business, and
15
provides that the disposition is void against the creditor for the purpose of
the enforcement if the person to whom the disposition
was made knew of the
proceedings or if the proceedings were instituted in a specified court. The
special situation provided for in
subsection (3) obtains whether or not notice
of the intended disposition referred to in subsection (1) was given. The
additional
protection afforded by subsection (3) is limited to those creditors
who instituted proceedings before the disposition, which in the
present case was
the contract itself, and the delivery cannot be regarded as a new disposition
merely in order to extend the protection
under subsection (3).
The
requirement of sec 34(1) prior to the 1991 amendment that, in order to have
effect, notice had to be published of the intended
conclusion of the contract
providing for the delivery of the business or property concerned and not of the
intention to effect
16
such delivery was widely critisiced by text-book and other writers. See
Meskin, Insolvency Law, para 5.31.18.1 and the articles referred
to in footnote
5; Mars, The Law of Insolvency, 8th ed 232-233; Smith, The Law of Insolvency,
3rd ed at 146; Swanepoel
1949 (12) THRHR 261.
So, for example, Meskin, ibid,
points out that sec 34 (1) created a requirement the observance of which was
incompatible with ordinary
commercial realities and that the focus of the
subsection was misdirected. The criticism is justified but the meaning of sec 34
(1),
read with the definition of "disposition" is clear, and effect must be
given thereto. Any other interpretation could, moreover, lead
to protracted
uncertainty, for example where transfer is not only postponed but is to occur in
stages. Since the Legislature is dealing
with one fixed period of six months,
which is vital for the determination of rights, certainty as to the date from
which the
17
period is to run is as imperative as in any statute dealing for example with
prescription.
Counsel for the appellant submitted in the alternative that
even accepting that the sole disposition was the contract itself, the
parties
intended the contract to become binding only upon the effective date ie 16
December 1989. There is no merit in the submission
and it can be disposed of
shortly. Clause 2.1, relied upon by counsel, as read with clauses 1.2.2.1 and
5.1 is not a condition pending
fulfilment of which there is no contractual
relationship; it is a term of the contract providing that 16 December 1989 is to
be the
time of performance of certain obligations, including delivery. It is
thus no more than a time clause (as to time clauses see Jurgens
Eiendomsagente v
Share
[1990] ZASCA 81
;
1990 (4) SA 664
(A) at 674 D - J; and as to the legal effect of a
suspensive condition see Odendaalsrust Municipality
18
v New Nigel Estate Gold Mining Company Ltd 1948(2)
SA 656 (A) at 666-7).
There is no indication in the contract of an intention to be bound only on 16
December 1989. On the contrary,
all indications are that the contract was
intended to have validity immediately upon signature. So, for example, clause
2.2 provides
for the seller to pay all liabilities including trading expenses up
to 15 December 1989.
For these reasons I am of the opinion that the relevant disposition occurred
on 6 December 1989 when the contract was concluded and
that the exception was
correctly upheld.
The appeal is dismissed with costs.
W. VIVIER JA.
JOUBERT JA) VAN DEN HEEVER JA) OLIVIER JA) VAN COLLER AJA) Concurred.