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Weltmans Custom Office Furniture (Pty) Ltd (In Liquidation) v Whistlers CC (1) (177/97) [1999] ZASCA 45 (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