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[1999] ZASCA 45
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Weltmans Custom Office Furniture (Pty) Ltd (In Liquidation) v Whistlers CC (177/97) [1999] ZASCA 45; 1999 (3) SA 1116 (SCA) (1 June 1999)
IN
THE SUPREME COURT OF APPEAL
OF
SOUTH AFRICA
Case No: 177/97
In the
matter between:
WELTMANS
CUSTOM OFFICE FURNITURE Appellant
(PTY)
LTD (IN LIQUIDATION)
and
WHISTLERS
CC Respondent
CORAM
: HEFER, NIENABER, SCHUTZ, JJA, MELUNSKY AND MADLANGA, AJJA
HEARD
: 6 May 1999
DELIVERED
: 1 June 1999
________________________________________________________________
JUDGMENT
________________________________________________________________
NIENABER
JA
NIENABER JA
:
[1] I
have read the judgment of Melunsky AJA. I am in broad agreement
with virtually everything he says in it - except for his
final
conclusion.
[2] In my respectful opinion the
magistrate was right in dismissing the appellant's claim; the court
a quo
was right in dismissing the appeal with costs; and this court
should do likewise.
[3] My
disagreement with my colleague arises from the nature of the
proceedings.
S 69(1)(a)
of the
Magistrates' Courts Act of 1944
provides:
"
69
Interpleader claims
(1)(a) Where any person, not being the judgment
debtor makes any claim to or in respect of any property attached or
about to
be attached in execution under the process of any court, or
to the proceeds of such property sold in execution, his claim shall
be adjudicated upon after issue of a summons in the manner provided
by the rules."
The
section applies because the sheriff, having attached the goods to
which the liquidators of the appellant now lay claim, issued
an
interpleader summons.
[4] The
attached goods, so the magistrate found as a fact, formed part of
the stock-in-trade which the respondent sold to Weltman
in
February 1994 for a price of R140 000. Weltman, as purchaser,
was repeatedly in arrears with the payment of the instalments,
in
consequence of which the respondent was obliged to take the series
of judgments against Weltman described in the judgment
of my
colleague. Against that background it is somewhat of a surprise to
discover that Weltman was able, in September 1994,
to resell the
business, of which he was so singularly unable to make a success, at
a price of R200 000 "plus the net
asset value of the
assets of the business as disclosed in the seller's books .....".
The business was sold
"as a going concern, including all the
stock-in-hand as at the Effective Date furniture, fixtures,
fittings, vehicles, appliances,
equipment and book debts together
with the goodwill of the said business".
But
the surprise is tempered by two considerations: The first is that
the R200 000 (quite apart from the value of the assets)
is
something of a phantom price, since clause 3 of the agreement
provides that the
"amount shall be reflected as a credit to Seller's
loan account in the books of the Purchaser and which shall be
payable
on demand".
The
second is that the agreement was signed by Weltman on behalf of both
the seller and the purchaser - which rather suggests
that the sale
was a contrived transaction. Moreover, knowledge of the sale was
deliberately withheld from Weltman's creditors,
including the
respondent, as appears from clause 13 of the agreement which reads:
"The parties hereby agree that the sale pursuant
hereto shall not be advertised in terms of section 34 of the
Insolvency
Act".
So
too the existence of the agreement of sale to the applicant was
manifestly not disclosed to the respondent when the settlement
agreement was negotiated and concluded.
[5] The
respondent obtained various judgments against Weltman. The defences
raised by Weltman were all spurious. These judgments
the respondent
was entitled to enforce by means of a writ of attachment as the
first step in the process of execution. The
attachment related to
the very goods which the respondent sold to Weltman and for which
payment remained outstanding. It is
to this attachment that the
appellant, as the claimant in the interpleader proceedings,
responded in the following terms:
"3. Weltmans Custom Office Furniture (Pty) Ltd (in
liquidation), the claimant in this matter, is the owner of the goods
which
have been attached by the Sheriff of the Court pursuant to the
judgment granted in favour of the judgment creditor.
4. The insolvent company purchased the
attached goods and obtained delivery thereof from Ivan Weltman
pursuant to a written deed
of sale concluded between Mr Ivan Weltman
and the insolvent company dated the 26
th
September 1994 ...
5. ...
6. As the judgment debtor is not the owner of the
attached goods, the judgment creditor cannot attach and sell same in
execution
of its judgment against the execution debtor. In the
circumstances, I respectfully request this Honourable Court to
release
from the attachment the movable goods in question."
[6] The
sole issue before the magistrate was therefore whether the appellant
was the owner of the goods attached. That in turn
depended upon
whether the sale by Weltman to the appellant was effective against
the respondent in the light of s 34(3) of the
Insolvency Act. The
attitude of the appellant, as claimant, was that the subsequent
settlement agreement rendered the section
inapplicable. It is on
that issue that the appellant lost before the magistrate, lost
before the Cape Provincial Division and,
according to the judgment
of Melunsky AJA, should lose before this court.
[7] I
am in agreement with my colleague that once the appellant's
contention fails and s 34(3) is held to be applicable, it does
not
follow as a matter of course that the respondent, as judgment
creditor, is entitled to priority amongst the appellant's creditors
to the full value of the post settlement consent to judgment i.e. in
an amount of R105 520,09. That follows from the express
wording of s 34(3), particularly if it is contrasted to the wording
of s 34(1), quoted in my colleague's judgment. In terms
of s 34(1)
"the said transfer shall be void as against his creditors",
provided the requirements of the section are
met. The transfer is
void in its entirety. In terms of s 34(3), if a creditor has
instituted proceedings "for the purpose
of enforcing his claim"
the transfer shall be void "as against him for the purpose of
such enforcement". The
transfer is void but only up to a
point. That point is the amount of the claims for which proceedings
had been instituted prior
to the transfer of the business to the
new purchaser. The respondent's entitlement to the proceeds of a
future sale in execution
should accordingly be restricted to the sum
of R22 188,57.
[8] It
is at this very point that I part company from the ultimate
conclusion arrived at by Melunsky AJA in his judgment. That
fact,
namely, that the respondent would only be entitled to execute
against the attached goods to the value of his pre-transfer
proven
claims, does not, in my opinion, translate into success for the
appellant on appeal.
[9] Nowhere
in the papers that I could discover did the respondent
positively assert that it was entitled to execute against
the
attached goods to the full value of the judgment it obtained by
consent i.e. R105 000. That was never an issue in the
proceedings before the magistrate. Nor was that ever the basis of
the appellant's challenge to the validity of the attachment.
Its
stance throughout was that the attachment was assailable because it
was owner of all the goods; and that it was the owner
because s
34(3) was inapplicable, having been superseded by the agreement of
settlement. If the appellant's stance had been
that the respondent
was only entitled to attach certain of the goods on the list, or to
the proceeds of a sale in execution only
up to a certain limit, the
entire proceedings would undoubtedly have taken on an entirely
different complexion. The point (as
to a limitation in the
respondent's demand) is in any event not closed to the appellant.
It can, if necessary, no doubt be raised
more appropriately at some
other stage.
[10] The
appellant's attitude was an all or nothing one. Its approach was
that the attachment had to be set aside in toto. I
agree with
counsel for the respondent that if the attachment is good to the
extent of R22 148, it is still a good attachment,
even if, at the
proposed sale in execution, the respondent's entitlement to the
proceeds will have to be limited to an amount
substantially less
than the value of its judgment debt.
[11] What the court
a
quo
said, in
the
dictum
quoted in paragraph 17 of my colleague's judgment, is what I
am saying: that the issue of any restriction on the
amount to
which the appellant would be entitled at the impending sale in
execution was irrelevant to the issues before the magistrate.
To
now find that the appeal is to succeed and that the respondent is to
remain liable for its own costs, not only in this court
but also
before the magistrate and the court
a
quo
, will, in my
respectful view, be grossly unfair to the respondent which
throughout acted perfectly properly and regularly in
trying to
enforce a judgment debt in its favour.
[12] The
following order is made: The appeal is dismissed with costs.
............................
P
M NIENABER
JUDGE
OF APPEAL
Concur:
Hefer JA
Schutz JA
MELUNSKY AJA/
MELUNSKY
AJA:
[1] The
issue in this appeal is whether the transfer of a business from Ivan
Weltman ("Weltman") to Weltman's Custom
Office Furniture
(Pty) Limited ("the company") is void as against the
respondent in terms of s 34(3) of the Insolvency
Act 24 of 1936
("the Act").
[2] Weltman
carried on business as a furniture manufacturer in Cape Town. On 25
February 1994 and pursuant to a written agreement
("the
original agreement") he purchased a business known as DMS
Woodcraft from the respondent, a close corporation,
for R140 000
payable at the rate of R5 000 per month with effect from 1 May. No
provision was made for the acceleration of payments
in the event of
the purchaser's default. Weltman failed to make any payment in
reduction of the purchase price and the respondent
instituted
proceedings against him in the Cape Town Magistrates' Court in which
the following amounts were claimed:
R12 188,57 for the May and June instalments and
R2 188,57 for rentals in respect of certain motor vehicles
which were leased
under the same agreement (case 17167/94, summons
served on 20 June 1994);
R5 000 for the July instalment (case 20803/94, summons
served on 27 July 1994);
R5 000 for the August instalment (case 24686, summons
served on 29 August 1994);
R20 000 for the September, October, November and
December instalments (case 37631/94, summons served on 3 January
1995).
[3] The
debts remained unsatisfied and during January 1995 the respondent
obtained judgments against Weltman for R37 188,57 in
terms of the
summonses in cases 17167/94, 24686/94 and 37631/94. For reasons
which are not apparent, judgment was not granted
in case 20803/94.
On 16 January 1995 the respondent caused a warrant of execution to
be issued pursuant to the judgments but,
as far as I am able to
judge, no attachments were made at that stage.
[4] On 18 August 1995 Weltman and
the respondent concluded a further agreement which was designated
"Deed of Settlement"
("the settlement agreement").
This recorded,
inter
alia
, that in
settlement of a dispute between the parties relating to the purchase
price payable for DMS Woodcraft, Weltman would
pay the respondent a
reduced price of R114 000 in monthly instalments of R8 000 together
with interest on the balance of the
capital sum. The agreement
provided that failure to make any one payment would result in the
full balance becoming due and payable.
It was also agreed that
Weltman would sign a consent to judgment in terms of s 58 of the
Magistrates' Court Act 32 of 1944.
This he duly did.
[5] Weltman
made only two payments under the settlement agreement and on 27
November 1995 the respondent obtained judgment against
him in the
Cape Town Magistrates' Court in terms of the consent. The amount of
the judgment - R105 520,09 - included the balance
of the capital,
interest and costs. Thereafter a warrant of execution was issued.
The case numbers reflected on the warrant
were 17167/1994,
20303/1994, 24686/1994 and 37631/1994. (The reference to case
20303/1994 instead of 20803/1994 appears to be
nothing more than a
typographical error.) On 6 December 1995 and pursuant to the
warrant the sheriff made an attachment of movable
property,
consisting in the main of woodworking machinery and equipment.
[6] On
26 September 1994, some eleven months before the settlement
agreement, Weltman had sold his furniture manufacturing business
as
a going concern to the company in terms of a written agreement.
Included in the sale were the stock, furniture, fixtures,
fittings,
vehicles, appliances and equipment of the business. It was a term
of the agreement that the sale would not be advertised
in terms of
s 34 of the Act. The property attached at the instance of the
respondent on 6 December 1995 had been transferred
by Weltman to the
company pursuant to the sale. This led to the present dispute. The
company, relying on the sale, claimed
ownership of the goods under
attachment. As a result an interpleader summons was issued at the
instance of the sheriff on 2
January 1996 in terms of s 69 of the
Magistrates' Court Act. On 16 January 1996 the company was placed
under a provisional winding-up
order which was made final on 20
February 1996. The provisional liquidators of the company proceeded
with the interpleader proceedings
on the company's behalf. We were
informed from the Bar that liquidators have since been appointed.
They persist in claiming
ownership of the property under attachment.
[7] The
present dispute is, therefore, between the liquidators and the
respondent. The resolution of the dispute is dependent
upon a
proper construction of s 34(3) of the Act.
[8] Section
34 reads:
"(1) If a trader transfers in
terms of a contract 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 or for securing the
payment of a debt),
and such trader has not published a notice of
such intended transfer 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 transfer, the said
transfer
shall be void as against his creditors for a period of six months
after such transfer, and shall be void against the
trustee of his
estate, if his estate is sequestrated at any time within the said
period.
(2) As soon as any such notice is published, every
liquidated liability of the said trader in connection with the said
business,
which would become due at some future date, shall fall due
forthwith, if the creditor concerned demands payment of such
liability:
Provided that if such liability bears no interest, the
amount of such liability which would have been payable at such
future
date if such demand had not been made, shall be reduced at
the rate of eight per cent per annum of that amount, over the period
between the date when payment is made and that future date.
(3) If any person who has any claim against the said
trader in connection with the said business, has before such
transfer, for
the purpose of enforcing his claim, instituted
proceedings against the said trader -
(a) in any court of law, and the person to whom the
said business was transferred knew at the time of the transfer that
those
proceedings had been instituted;
or
(b) in a Division of the Supreme Court having
jurisdiction in the district in which the said business is carried
on or in the
magistrate's court of that district,
the transfer shall be void as against him for the
purpose of such enforcement.
(4) For the purposes of this section 'transfer', when
used as a noun, includes actual or constructive transfer of
possession,
and, when used as a verb, has a corresponding meaning."
It
is not in dispute that Weltman was a trader within the meaning of
the section; that the respondent's claim was in connection
with
Weltman's business; that the property subsequently attached was
transferred by Weltman to the company; that the transfer
was not in
the ordinary course of business or for securing the payment of the
debt; that the sale was not advertised in terms
of s 34(1) of the
Act; and that both Weltman and the company knew at the time of
transfer that the respondent had instituted
actions against Weltman
by means of the summonses in cases 17167/94, 20803/94 and 24686/94
in the Cape Town Magistrates' Court.
[9] The
liquidators' contentions, in short, are that the goods under
attachment became the property of the company pursuant to
the sale
of 26 September 1994 and that s 34(3) of the Act has no application
to this case as the legal proceedings instituted
by the respondent
against Weltman were for the purpose of enforcing the original
agreement and not the settlement agreement.
Moreover the attachment
was effected pursuant to a consent to judgment given by Weltman
under the settlement agreement.
[10] The
respondent contends that the proceedings taken against Weltman
before the transfer of the business to the company resulted
in the
settlement agreement and that the proceedings were in fact enforced
by means of the settlement and the consent to judgment
which formed
part of it. Consequently, according to the argument, s 34(3)
applied and the transfer of all of the property by
Weltman to the
company was void as against the respondent.
[11] The
magistrate who heard the interpleader proceedings found in the
respondent's favour and ordered that the liquidators'
claim be
dismissed with costs. An appeal to the Cape Provincial Division
(Van Zyl J and S F Burger AJ) was dismissed with costs
but leave to
appeal to this Court was subsequently granted.
[12] This
brings me to consider whether the institution of proceedings during
June to August 1994 can properly be said to relate
to the settlement
agreement for the purposes of s 34(3). Counsel for the liquidators
submitted that the deed of settlement,
being an unconditional
compromise, had the effect of terminating the original agreement.
According to the submission, the claims
in respect of which the
respondent had instituted proceedings arose out of the original
agreement but this agreement could not
be enforced once the
compromise became effectual. Accordingly the judgment granted on 27
November 1995 was an enforcement of
the settlement agreement, for
the respondent did not - and could not - rely on the earlier
proceedings or the original agreement.
[13] The resolution of the dispute,
however, is dependent upon a proper construction of s 34(3) and not
only on whether at common
law a compromise ordinarily precludes the
creditor from enforcing the original debt. What is necessary to
decide is whether
the creditor loses his protection under the
subsection if, after the institution of proceedings, the contract on
which the claim
is based is amended or superseded by a subsequent
agreement. The determining factor in each case is the closeness of
the connection
between the original agreement and the amending or
subsequent agreement. It is, for instance, unthinkable that the
mere reduction
of the original contract price after the institution
of proceedings to enforce the debt would result in the removal of
the protection
that a creditor had acquired under the subsection.
Section 34(3) was intended,
inter
alia
, to benefit a
vigilant creditor and not to penalise him for reducing his claim in
order to resolve a festering dispute. Moreover
it is clear that it
is not necessary for the creditor to take judgment against the
transferee in order to obtain the benefit
of the sub-section. All
that is required is that the proceedings should have been instituted
prior to the transfer.
[14] It
now becomes necessary to decide whether, on the facts of the present
case, the proceedings instituted before the transfer
are
sufficiently closely connected to the settlement agreement to
entitle the respondent to contend that the transfer is void
in terms
of s 34(3). The recital to the settlement agreement recorded that
a dispute which had arisen relating to the sale
of DMS Woodcraft had
been settled. Clause 10 provided that the agreement
"constitutes a full and final settlement of
differences and disputes between [Weltman and the respondent]
arising from and
relating to the purchase of the business known as
DMS Woodcraft in terms of the Agreement and arising from and
relating to the
various actions in the Cape Town Magistrate's Court
under case numbers 17167/94, 20803/94, 24686/94, 37631/94."
In
terms of the agreement the respondent undertook to consent to the
rescission of the three default judgments that had been granted
against Weltman and to withdraw the other action (case 20803/94)
with no order as to costs. In due course the judgments were
rescinded and case 20803/94 withdrawn.
[15] Clearly,
therefore, the settlement agreement was a compromise of the dispute
that had arisen out of the original agreement.
As part of the
settlement Weltman's liability was reduced, the monthly instalments
were increased and an acceleration clause
was inserted.
Significantly the sale of DMS Woodcraft remained effectual to the
extent that Weltman retained the business.
The consent to judgment
that Weltman signed was akin to an acknowledgment of debt. It made
provision for judgment to be granted
against him for the capital
sum, interest and costs if he failed to pay any one instalment in
terms of the settlement agreement.
[16] Counsel
for the appellant was undoubtedly correct in arguing that after the
compromise the respondent was not entitled to
fall back on the
original agreement as the settlement agreement made no express or
implied provision for this. That submission,
as I have pointed out,
does not take into account the statutory provisions which have to be
construed. On the facts of this
case it is clear that the
compromise did not change the essential nature of the respondent's
claim against Weltman for the purposes
of the sub-section. Both the
original and the settlement agreements related to the sale of the
same business and the respondent's
claim, under each agreement, was
for payment of the purchase price. The compromise differed from
the original agreement in
relation to the amount payable and the
method of payment but it did not alter the essence of the
respondent's claim or the debtor's
obligation. Nor does anything
turn on the rescission of the judgments and the withdrawal of the
action in case 20803/94. These
steps were taken to implement the
settlement and not to negate it. The result is that the proceedings
instituted by the respondent
before the transfer are sufficiently
closely connected to its claim under the settlement agreement to
entitle this Court to hold
the transfer to be void for the purposes
of s 34(3).
[17] That conclusion does not
dispose of the appeal. The proceedings instituted before the
transfer of the property to the company
were for claims which
totalled R22 188,57. It may be observed that when the transfer was
effected on 26 September 1994 only
a further R5 000 had become due
in terms of the original agreement. The question raised in this
Court was whether the transfer
is void only to the extent of R22
188,57. This issue was not dealt with in the Magistrates' court but
it was alluded to in the
court
a
quo
as follows:
"The fact that the amount of
such claims totalled only R22 188,57 is irrelevant for purposes
of the applicability of
the said section, which merely requires 'any
claim' which has been enforced by the institution of proceedings
before transfer
of the business. The respondent in fact had three
claims which it enforced by instituting proceedings prior to such
transfer
and which proceedings culminated in the settlement
agreement which immediately rendered them
res
judicata
."
[18] The
expression "any claim" which was relied upon by the
Provincial Division, is qualified by the words which
precede and
follow it. Stripped of its inessentials, for present purposes, s
34(3) reads:
"If any person who has any claim against the said
trader ... has before such transfer, for the purposes of enforcing
his
claim, instituted proceedings against the said trader ... the
transfer shall be void as against him for the purpose of such
enforcement."
The
relevant portions of the sub-section show that there is a direct
relationship between the creditor's claim and the proceedings
for
enforcing it. Secondly the transfer is said to be void for the
purpose of the enforcement. There is, therefore, also a
clear
correlation between the enforcement of the claim and the extent to
which the transfer is void.
[19] It
may be noted that the Afrikaans version of the sub-section differs
somewhat from the English version. The relevant parts
of the former
version provide:
"As iemand wat 'n vordering teen bedoelde
handelaar ..., voor daardie oordrag, ten einde betaling van sy
vordering te verkry,
'n regsgeding teen bedoelde handelaar ingestel
het ... dan is die oordrag teenoor hom nietig sover as nodig is om
sy vordering
te laat geld."
Significantly in the Afrikaans
version, which is the signed text, the words used are "'n
vordering". Moreover what
is provided for in this version is
the institution of proceedings for the purpose of obtaining payment
of the creditor's claim
and the transfer is said to be void so far
as it is necessary to enable the creditor to maintain his claim.
The Afrikaans version,
too, clearly envisages a relationship between
the claim and the legal proceedings and between the voidness and
the recovery
of the claim. It follows from the grammatical
construction of the section that the transfer is void only to the
extent to which
the creditor had previously instituted proceedings.
This construction also avoids the incongruous results that would
follow
if the court
a quo's
interpretation
is to be applied. On that construction the transfer would be void
in respect of claims which were not due or
legally enforceable at
the time of the transfer. This in turn would result in an
unwarranted windfall to the claimant but prejudice
to a
bona
fide
transferee
and, possibly, his creditors. These consequences could not have
been intended. In my view it follows that the transfer
from Weltman
to the company is void as against the respondent only to the extent
of property having the value of R22 188,57.
To this extent the
appeal succeeds.
[20] It
remains to consider the question of costs and the form of the order.
In the interpleader proceedings before the Magistrate
the parties
were agreed that the matter should be dealt with on the basis of
affidavits before the court, the contents of which
do not need to be
set out in this judgment. Accordingly no oral evidence was led and
the value of the goods under attachment
was not established. It is
therefore not possible to say whether the liquidators will
ultimately benefit from the finding that
the transfer is void only
to the extent of R22 188,57. It follows from this that it cannot be
decided whether either party will
achieve substantial success in the
litigation. The fairest way in dealing with this conclusion is to
make no order as to costs
in respect of the proceedings in all
courts.
[21] It
is a matter of concern that the record on appeal, relatively short
as it was, contained a considerable number of duplicated
documents,
the effect of which was to increase the length of the record
unnecessarily. To make allowance for this counsel for
the
liquidators conceded that it would be fair if his attorneys were
directed to recover no costs relating to the preparation
and perusal
of the whole of volume 1 of the record. We were informed that the
attorneys concerned had, commendably enough, offered
to accept such
a direction without the need for an order. This being the case no
special order will be made.
[22] In
the absence of evidence concerning the value of each item under
attachment, the order should make provision for the sheriff,
after
the sale in execution of sufficient goods under attachment to cover
R22 188,57 together with the costs of execution, to
deliver the
remaining goods, if any, to the liquidators.
[23] I
would therefore order:
1. The appeal is allowed;
2. The order of the magistrate is altered to read:
"The sheriff is authorised to sell property under
attachment in execution to an amount of R22 188,57 for the benefit
of the
judgment creditor, together with the costs of execution. The
remaining goods under attachment, if any, are to be delivered to
the
claimant after the sale in execution. There will be no order as to
costs."
3. There will be no order in respect of
the costs on appeal to the court
a quo
or
on appeal to this Court.
_________________________
L S MELUNSKY
ACTING
JUDGE OF APPEAL
MADLANGA AJA
:
[1] The conclusion that I come to is that at the time
the respondent enforced its claim in terms of the “consent to
judgment”
no proceedings instituted before transfer were still
in existence. That being the case, the protection afforded by
section 34(3)
upon which the respondent could formerly rely had
fallen away. The appeal should thus succeed with costs. I proceed
to set
out my reasons for this conclusion. I rely on the facts as
correctly set out by Melunsky AJA.
[2] Paraphrasing the terms of section 34(3), the
factors which trigger the creditor’s protection are the
following:
(i) the creditor should have a claim against the
trader;
(ii) the claim should be in connection with the
business of the trader;
(iii) the business, or its goodwill, or its goods or
property should have been transferred in terms of a contract;
(iv) before the transfer the creditor should have
instituted proceedings against the trader; and
(v) the proceedings should have been instituted for the
purpose of enforcing the claim.
[3] The word “such”
appearing just before the word “enforcement” at the end
of the subsection refers
back to proceedings instituted before
transfer “for the purpose of
enforcing
[a] claim” (my emphasis). In my view, at the time when the
creditor relies on the protection contained in the subsection
proceedings should have been instituted before transfer to enforce
the claim. Those proceedings must either be pending or
have been
finally determined in the creditor’s favour. Therefore, I do
not see any basis upon which a creditor who,
(a) before transfer, institutes proceedings of the
nature envisaged in section 34(3) against a trader,
(b) one or two days after transfer, withdraws the
proceedings, and
(c) some months thereafter, institutes proceedings
which are identical to those withdrawn earlier
could avail him-/herself of the
protection contained in the subsection. The earlier proceedings,
though instituted before transfer,
become irrelevant after their
withdrawal. The later proceedings do not assist the creditor
because they were not instituted
before
transfer. A further example would perhaps illustrate the point. A
creditor may, as
in
casu
, seek to
avail him-/herself of the section 34(3) protection when, after
judgment, he/she meets with resistance when attempting
to have the
goods or property of the business referred to in the section sold in
execution. However, it seems to me that a creditor
may invoke
section 34(3) even before judgment. I give the following example.
[4] Before transfer a creditor institutes proceedings
against a trader in respect of a claim envisaged in section 34(3).
The
court before which the proceedings have been instituted is not
one of the courts referred to in section 34(3)(b). The transferee
(i.e. one who took transfer from the trader) knows at the time of
transfer that the proceedings have been instituted. Before
judgment but after transfer the creditor discovers that the
transferee is about to transfer the business and/or goods or
property
forming part of such business to yet another person (“third
person”). The trader (i.e. the original transferor) has
no
assets which can be attached to satisfy whatever judgment the
creditor may subsequently obtain. Should the transferee who
took
transfer from the trader effect transfer to the third person, it is
doubtful whether the creditor can have recourse against
the third
person. Firstly, the words “such transfer”, “was
transferred” and “the transfer”
in section 34(3)
obviously refer to transfer by the trader and not subsequent
transfer by the original transferee. Therefore,
even if the third
person may be found to have known, whether at the time of the
original transfer or at the time of the transfer
to him-/herself,
that proceedings had been instituted, such knowledge is immaterial
for purposes of paragraph (a) of section
34(3). “The
transfer” which becomes void is transfer by the trader and not
by the original transferee. Secondly,
the alternative offered by
paragraph (b) of section 34(3) is also not available to the creditor
because on this example the court
in which the proceedings were
instituted is not one envisaged in the said paragraph (b). In the
circumstances it seems to me
that the creditor, even before
judgment, would be entitled to seek an interdict to prevent
transfer of the business and/or its
goods or property to the third
person pending the final determination of the proceedings instituted
prior to the transfer by
the trader. In this way the creditor
would preserve the protection afforded him/her by the subsection.
Therefore, save that
in my view the proceedings instituted prior to
transfer must continue to exist after transfer until culmination in
judgment in
the creditor’s favour, I agree with the last two
sentences of paragraph [13] of Melunsky AJA’s judgment.
[5] Let me alter the last example.
Suppose that some time after the initial transfer by the trader
the creditor withdraws
the proceedings. As at the time the creditor
becomes aware of the subsequent impending transfer to the third
person there are
thus no proceedings in existence. In my view the
mere fact that proceedings (which were subsequently withdrawn) had
previously
been instituted is not enough to afford the creditor the
protection of the subsection. In the absence of extant proceedings
instituted before the initial transfer there can be no question of
the
enforcement
of such a claim (
vide
“such enforcement” in section 34(3)
in fine
). It
must be noted that a transfer in the circumstances set forth in the
subsection is not
ipso facto
void
for all purposes. It is void only against the creditor and for
the limited purpose of the enforcement of the creditor’s
claim. Unless and until the creditor invokes the provision the
transfer is unaffected. Any fresh proceedings instituted by
the
creditor
after
transfer can obviously not qualify as fitting the description in
section 34(3) of proceedings instituted “before such transfer,
for the purpose of enforcing his claim”. The definitive
moment which determines whether or not the protection afforded
by
the provision accrues is the moment of transfer. If there is then
neither a pending proceeding nor a judgment in favour of
the
creditor there is no possibility of the transfer being rendered void
thereafter. The fact that there was at some prior time
a pending
proceeding is irrelevant. The provision plainly postulates an
unbroken connection between the proceedings which it
requires to be
instituted before transfer and the enforcement of which it speaks.
Enforcement of a claim by the institution
of proceedings after
transfer cannot be equated with enforcement of a claim by the
institution of proceedings before transfer
on the ground that there
was an abortive and abandoned institution of proceedings in respect
of the same claim before transfer.
[6] In the instant case what needs to be established
is whether the various proceedings instituted by the respondent
before transfer
(and enumerated in paragraph [2] of Melunsky AJA's
judgment) are still in existence (in a continuous manner as
indicated above)
or, having so existed and continued to exist, have
culminated in judgment/s in the respondent's favour. That is not
the same
as an enquiry whether the original claim which the
respondent had against Weltman is substantially similar to, or
closely connected
with, the claim as compromised in the settlement
agreement (see paragraphs [13] to [16] of Melunsky AJA's judgment).
In my
view even if the original claim is substantially similar to,
and closely connected with, the claim as compromised, there can be
no protection in terms of section 34(3) if, after transfer, there
has been a withdrawal or unconditional abandonment of the
proceedings that were instituted before transfer for the purpose of
enforcing the original claim.
[7] It is so that in concluding
the settlement agreement with Weltman the respondent was not
abandoning the claim based on the
sale of DMS in the sense that
Weltman was discharged from liability without offering anything in
return. But what seems clear
is that it agreed to abandon its
entitlement to enforce its original claim against Weltman in return
for a renegotiated agreement
on very different terms. The question
which must be asked is whether, at the time the respondent invoked
the protection contained
in section 34(3), there were proceedings
to enforce the compromised claim (as opposed to the original claim)
instituted before
transfer of the business by Weltman to Weltmans
Custom Office Furniture (Pty) Ltd (“the company”, being
the appellant
herein) which were either still pending or had been
finally determined in the respondent's favour. The determination of
this
question is not necessarily dependent upon the intention of the
respondent (or of Weltman and the respondent, for that matter).
It
depends on whether what took place
in
casu
falls within
the purview of the protection afforded by the subsection.
[8] The settlement agreement,
inter alia
,
provided for the withdrawal of the action in respect of which no
judgment was ever obtained (Case No 20803/94 - for R5 000,00)
and for the rescission of judgment in the three matters in which
judgment had been obtained (Case No's 17167/94, 24686/94 and
37631/94 - respectively for R12 188,57, R5 000,00 and
R20 000,00). This was done. Those proceedings and those
judgments were no more. In my view, the unavoidable consequence of
this is that the foundation upon which the respondent’s
right
to have the transfer regarded as void against it for the purpose of
enforcing its original claim , was destroyed by the
respondent’s
own act. I cannot see how it can be resurrected. Anything done
thereafter would not retrieve the situation
because, even if
whatever was done amounted to the institution of proceedings which
sought to enforce the original claim, it
would be taking place
after
transfer. Moreover, I do not see how the signing long after
transfer of a “consent to judgment” could alter the
position even if it took place
simul ac semel
with the agreement to withdraw, and the actual withdrawal of, the
proceedings and the agreement to rescind, and the actual
rescission
of, the judgments. Indeed, it seems that in such a situation it
would even be a misnomer to refer to a "consent
to judgment".
Erasmus,
Superior
Court Practice
,
p. B1-196, although dealing with "judgment on confession"
in the High Court, states that this procedure is what is
generally
known as "consent to judgment". Placing reliance on
Eloff
v Malan
1928 TPD
393
, the learned author makes the following point:
"A deed of settlement of the
plaintiff's claim to a servitude,
the
plaintiff's claim being withdrawn
and the defendant undertaking in consideration of such withdrawal to
transfer certain ground, is not a consent of claim within
the ambit
of [rule 31 (1)] and cannot be made an order of court under it."
(My emphasis).
The necessity, in terms of rule
31(1), for the confession to relate to the whole or a part of the
claim "contained in the
summons" suggests that there
should be an action to which such confession will relate.
Section
58
of the
Magistrates' Courts Act 32 of 1944
, which is the section
specifically referred to by Weltman and the respondent in the
settlement agreement, is somewhat differently
worded. In terms of
this section a consent to judgment may be based on a summons or on
a letter of demand even if no summons
has been issued. Where
consent to judgment is based on a letter of demand the proceedings
as such only come into existence
once a letter requesting judgment
has been lodged with the clerk of the court in terms of section
58(1) (or 57(2)) of the Magistrates’
Courts Act. In this
regard I refer to section 59 of the last mentioned Act which
provides that where no summons has been issued
the request for
judgment in terms of the consent “shall constitute the
first
document to be filed in the action” (my emphasis). In the
instant case, because the previous proceedings had been abandoned,
the subsequent approach to the magistrate’s court for judgment
in terms of the “consent to judgment” amounted
to no
more than proceedings instituted after
transfer
.
Any subsequent judgment based upon such proceedings could not have
been a judgment given in any of the proceedings which were
instituted before transfer. As Melunsky AJA appears to accept,
“after the compromise the respondent was not entitled to
fall
back on the original agreement”. It must follow that any
judgment subsequently obtained cannot be a judgment in any
of the
proceedings which were instituted before transfer to enforce the
original agreement. The judgment subsequently obtained
was quite
plainly obtained not to enforce the original claim, but to enforce
the compromised claim. The compromised claim only
arose after the
transfer and the judgment which it is sought to enforce is a
judgment in respect of that claim.
[9] I thus come to the conclusion
that where proceedings have been withdrawn and judgments rescinded
after transfer, and notwithstanding
that a deed of settlement
containing a “consent to judgment” has been entered
into, the proceedings and judgments
disappear. I am not unmindful
of the fact that my approach may be countered by an argument that
after rescission of judgment
in terms of the settlement agreement
the relevant matters reverted to the status of pending matters and
as such, and because
two of them were instituted before transfer,
they continued to afford the respondent protection in terms of
section 34(3). Ordinarily
once judgment has been rescinded the
matter does revert to the status of a pending matter. In the
instant case, however, to
say that this is what happened in respect
of the two matters would be technical in the extreme and a complete
failure to look
at what in fact happened. The intention of Weltman
and the respondent was to get rid of all the previous proceedings.
This
is evidenced by the withdrawal of the one case and the
rescission of judgments in the others - withdrawal was not an
immediately
available option in the latter matters. It would have
been too convoluted a procedure for the parties to rescind the
judgments
and then to withdraw the actions. The intention is clear
- all previous proceedings were being abandoned. If at all it can
be contended that any of the proceedings continued to exist, they,
as Mr
Kirk-Cohen
who appeared for the respondent put it, existed “only as
shells” and at no stage in the future could they ever be
pursued.
[10] It may be so that considerations of equity
informed or dictated the enactment of the protection contained in
section 34(3).
However, when it comes to determining whether it is
open to a creditor to invoke the subsection generalised appeals to
equity
may not assist him/her. What matters is whether his/her
situation does fall within the ambit of the subsection. The
approach
I have adopted might superficially appear to be inequitable
to a creditor (like the respondent) who has throughout been diligent
in looking after his interests insofar as the claim he has against
the trader is concerned. However, such creditor can easily
protect
his/her interest by refusing to agree to an unconditional, absolute
withdrawal of the proceedings instituted before transfer
or the
rescission of judgments granted before transfer. An agreement could
have been structured which, for the most part, resembled
the
present settlement agreement but kept the proceedings in abeyance
and the judgments intact pending fulfilment by Weltman
of the
obligations undertaken in the deed of settlement.
[11] In the result, I must
regretfully conclude that the respondent failed to bring himself
within the provisions of section
34(3) and that the decision of the
magistrate and the court
a
quo
to the
contrary cannot be supported.
[12] I accordingly would make the following order:
1. The appeal is upheld with costs.
2. The order of the magistrate is altered to read:
“
(a) The attachment of goods under a warrant
reflecting Case No’s 17167/94, 20803/94, 24686/94 and 37631/94
is set aside
and the sheriff is directed to return the goods
attached in terms of the said warrant to the claimant.
(b) The judgment creditor shall pay the claimant’s
costs in the interpleader proceedings.”
3. The respondent shall pay the appellant’s costs
of appeal to the Full Court of the Cape of Good Hope High Court.
_____________________
M R MADLANGA
ACTING JUDGE OF APPEAL