South Africa: Supreme Court of Appeal
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Republic of South Africa
IN THE SUPREME COURT
OF APPEAL
OF SOUTH AFRICA
Reportable
Case No: 112/99
In the matter between
H DABELSTEIN & 12 OTHERS
Appellants
and
M LANE & E FEY NNO
Respondents
Coram: Hefer ADCJ, Vivier, Nienaber, Harms, Plewman JJA
Date of hearing: 14 November 2000
Date of delivery: 28
November 2000
Summary: Attachment to found or confirm jurisdiction
- prima facie case - insolvency - setting aside disposition in compliance
with court order.
JUDGMENT
HEFER ADCJ
[1] If the trustee of an insolvent estate fails
to initiate proceedings to set aside a disposition under secs 26, 29, 30, or 31
of the
Insolvency Act 24 of 1936, as amended (“the Act”), then, in
terms of s 32(1)(b), any creditor may do so in the name
of the trustee upon his
indemnifying the latter against all costs of the proceedings.
[2] The present case relates to the insolvent estate of J〈rgen
Harksen which was sequestrated by order of the Cape Provincial Division
of the
High Court. The main issue in the appeal is the correctness of Van Zyl J’s
subsequent order in the same court confirming
a rule nisi authorising
three German creditors (“the applicants”) to attach certain South
African assets of thirteen other foreign
creditors (“the
Dabelsteins”) ad fundandam vel confirmandam jurisdictionem with a
view to the institution of an action by the applicants in the name of the
provisional trustees for the annulment of two
allegedly impeachable
dispositions.
[3] A preliminary submission for the respondents is
that the court a quo’s judgment is not appealable since, in terms
of s 150(4), there is no appeal (subject to certain exceptions) against an
order
made in terms of the Act. The judgment has been reported (Lane and
Another v Dabelstein and Others (Lane and Another NNO Intervening) 1993(3)
SA 150 (C)) and it appears from the report that the court decided several issues
but made only two substantive orders: it
granted the present respondents leave
in terms of s 18(3) to institute the proposed action (163G-H) and, by confirming
the rule nisi, ordered the attachment of the Dabelsteins’
property. The first order may well be classified as one in terms of the Act but
the
order for attachment was made under the common law. It is plainly not
affected by s 150(4). Moreover, such an order finally disposes
of the issue of
jurisdiction and is thus appealable. (Tick v Broude and Another 1973(1)
SA 462 (A) at 465G - 467A.) I will confine my judgment to this order.
[4] The facts need not be restated because, although there are
several matters on which the parties do not agree, this judgment will focus
on a
single decisive issue. Suffice it to say that the dispute is entirely about two
payments made by Harksen to the Dabelsteins
before the sequestration of his
estate which are alleged by the applicants to be impugnable dispositions under
secs 26, 29 or 30
of the Act. But both were made in terms of orders of court and
the definition of “disposition” in s 2 expressly excludes
“a
disposition in compliance with an order of the court”. It is incumbent
upon an applicant for an order of attachment to establish a prima
facie case in the proposed action and, since the amounts paid cannot be
recovered unless there is room for a finding that the payments
are not affected
by the exclusion, the only question is whether such a finding is justified.
[5] Relying on Sackstein and Venter NNO v Greyling
1990(2) SA 323 (O) the applicants’ counsel submits that it is indeed
justified. In that case the plaintiffs sought to have
a disposition set aside
under s 29 or 30 despite the fact that it had been made in compliance with an
order of court. The order had
been granted in terms of a settlement agreement.
At 327B-D Van Coller J reasoned that the exclusion in s 2 could not have been
intended
to afford protection to the receiver of property who fraudulently
colluded to procure an order of court with a view to prejudicing
other
creditors; and that there may be other forms of improper conduct that may
justify the refusal of protection. Although the
plaintiffs had not alleged
collusion or fraud or any other form of improper conduct in the conclusion of
the settlement agreement
an exception to the particulars of claim was dismissed
on the ground that it might emerge at the trial that the parties had acted
fraudulently.
In the present case both orders were granted in terms of
settlement agreements between Harksen and the Dabelsteins and the submission
is
that the latter are not protected by the orders because the parties to the
agreements were not bona fide. (Precisely what the so-called lack of
bona fides connotes will be discussed later.)
[6] This
argument found favour with Van Zyl J in the court a quo. As appears from
170C-171F of the reported judgment the learned judge associated himself with
Van Coller J’s views in Sackstein and Venter and proceeded
to say in effect that no order granted by agreement will protect the
receiver of property against a claim to set aside an impeachable
disposition.
[7] This part of Van Zyl J’s judgment calls for the following
comment:
It was said in Simon NO v Air Operations of Europe AB and Others
1999(1) SA 217 (SCA) at 228C-D that the requirement of a prima facie
case in an application for attachment to found or confirm jurisdiction is
satisfied where there is evidence which, if accepted, will
show a cause of
action, and that the mere fact that such evidence is contradicted will not
disentitle the applicant to relief. The
time may come to reconsider these
dicta for, as observed elsewhere in the passage referred to, an order of
attachment ad fundandam jurisdictionem is an extraordinary remedy which
should be applied with care and caution, and it seems to me that allegations in
a respondent’s
opposing affidavit which the applicant cannot contradict
must weigh in the assessment of the evidence. However, accepting the statements
at face value, it is plain that an applicant must at the very least make all the
allegations in his founding affidavit that will
sustain a cause of action. I
accept for purposes of the argument that there are cases where dispositions in
compliance with orders
of court may be set aside. On the view that I take of the
matter it is not necessary to decide on precisely what grounds this may
be
done. I will assume that fraud or collusion or perhaps other kinds of
reprehensible conduct on the creditor’s part in procuring
an order will
suffice. Plainly, however, it will not be sufficient merely to bring the
disposition within the ambit of one or more
of the relevant provisions of the
Act as was done in Sackstein and Venter. An alienation of property may
eg be set aside under s 26 as a disposition without value but, if it occurred in
compliance with an
order of court, additional allegations will have to be made
in order to nullify the effect of the exclusion in s 2 (cf Swadif (Pty) Ltd v
Dyké NO 1978(1) SA 928 (A) at 938B-939H). If fraud is relied upon,
then fraud must be alleged; and so with collusion and any other conduct
relied
upon.
In the present case the applicants’ reliance on a lack of
bona fides is mentioned (at 170B-C) but not pursued in the judgment. Lack
of bona fides was not the ratio for the conclusion that a prima
facie case had been established. That conclusion, it seems, was based on the
view that no judgment by agreement can be regarded as an order
for purposes of
the exclusion and that a case had been made to set the settlement agreements
aside under s 29 or 30. I cannot accept that an order does not qualify as an
order for purposes of the exclusion merely because it
was made in terms of an
agreement. Admittedly, as observed in Muller and Another NNO v John Thompson
Africa (Pty) Ltd and Another 1982(2) SA 86 (D&CLD) at 92A-C, it may open
the door to abuse if a person who is in insolvent circumstances were to make an
agreement
that would in the ordinary course of events be a voidable disposition
and then consent to have the agreement made an order of court.
But at 92H Milne
J indicated, rightly in my view, that the same cannot be said of all consent
orders.
[8] This brings me to the so-called lack of bona fides
in the conclusion of the agreements relied upon by the applicants. Their
counsel argues that the parties were not bona fide in that (1)
Harksen knew that he was insolvent at the time whilst the Dabelsteins’
attorney who brokered the agreements suspected
that to be the case; (2) both
parties intended to prefer the Dabelsteins above other creditors and (3) the
agreements were converted
into orders of court for the very purpose of procuring
the exclusion provided for in s 2 of the Act. This is the argument but what
does
the founding affidavit say? The only pertinent allegations therein are the
following:
“ 10
I accordingly respectfully say that:
“10.1 The Dabelsteins received the payment of DM 3,5 million on 31 March 1994, at a time when Harksen’s liabilities far exceeded his assets;
10.2 The above payment was clearly intended to prefer the recipients thereof above the other creditors of Harksen;
10.3 The above (intention to prefer) is to be inferred, inter alia, from the fact that:
at the time of the payment Harksen had already contemplated his own (voluntary) sequestration or surrender of his estate for several months ...;
Harksen himself, clearly as advised by his lawyers, demanded from the trustees ... that the above dispositions be set aside.
10.4 The payment of DM3,5 million to the Dabelsteins accordingly clearly stands to be set aside in terms of section 30 of the Insolvence Act.
In respect of the payment of DM500 000 to the Dabelsteins in August 1995, I respectfully say that such payment:
11.1 occurred within six months of the date of Harksen’s final sequestration in October 1995;
11.2 clearly had the effect of preferring of his creditors above
others;
11.3 took place at a time when Harksen’s liabilities far
exceeded his assets;
11.4 was not made in the ordinary course of business
...;
11.5 was also a disposition without value;
11.6 stands to be set aside in terms of section 26 or 29 of 30, or all three such sections, of the Insolvency Act.
12
I accordingly respectfully say that the Applicants made out a prima
facie case for the setting aside of the above
dispositions.”
[9] From this it will be seen that, apart
from Harksen’s de facto insolvency, none of the other matters is
addressed in the affidavit. Nor can they be inferred (as the
applicants’ counsel invited us to do) from the grains of fact
interspersed between a mass
of hearsay, bald allegations and inferential
reasoning in the founding affidavit. The replying affidavit goes some way
towards showing
that the Dabelsteins must have suspected that Harksen was in
insolvent circumstances, but it is quite clear from all the evidence
that the
parties were at arms length when the settlements were concluded and that there
could not have been collusion. Moreover,
even in this affidavit, collusion is
not alleged; nor is fraud on the Dabelsteins’ part nor the improper
motive on which respondents’
counsel now seeks to rely. It is difficult to
avoid the impression that the draftsman of the affidavit was not attuned to
nullifying
the effect of the exclusion of s 2 and that counsel is seeking to
make the best of a bad case.
[10] Because I am of the view that the
application for attachment had to founder on the simple ground that a prima
facie case was not established, it is unnecessary to deal with the other
rulings in the court a quo’s judgment. The learned judge ruled eg
that a creditor who wishes to commence proceedings in the name of a provisional
trustee
under s 32(1)(b) of the Act does not require the leave of the court in
terms of s 18(3); and that it is permissible to bring such
proceedings before
the second meeting of creditors. The fact that I have not dealt with these
matters should not be taken to imply
that I necessarily agree with the
rulings.
[11] On the ground that portion of the record has become
redundant as a result of concessions made in the appellants’ heads of
argument respondents’ counsel requested us to make a special order
of costs in the event of the appeal succeeding. However, the relevant
part of
the record is so small that a special order is not called for.
[12]
It is noted that, after judgment in the appeal had been reserved, we
received an application by the respondents for leave to adduce
further evidence.
The proposed new evidence, notwithstanding a submission therein to the contrary,
has no bearing on this judgment.
The appeal is accordingly upheld with costs including the costs of two
counsel and the costs occasioned by the application to adduce
further evidence.
The order of the court a quo is set aside and replaced with an order
discharging the rule nisi with costs including the costs of two counsel.
___________________
JJF HEFER
Acting Deputy Chief Justice
Concur:
Vivier JA
Nienaber JA
Harms JA
Plewman
JA