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THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA
CASE NO : 177/97
In the matter between:
WELTMANS CUSTOM OFFICE
FURNITURE
(PTY) LTD (IN LIQUIDATION)
Appellant
and
WHISTLERS
CC Respondent
CORAM: Hefer, Nienaber, Schutz JJA and
Melunsky, Madlanga AJJA
Date of Hearing: 6 May 1999
Date of
Judgment: 1 June 1999
JUDGMENT
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institutes proceedings which are identical to those withdrawn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
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