THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case No:  447/07
Reportable

In the matter between:

CARMEL TRADING COMPANY LIMITED                           Appellant
and

THE COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE SERVICE

First Respondent
HAWKER AVIATION SERVICES
PARTNERSHIP

Second Respondent
HAWKER AIR SERVICES (PTY) LIMITED
(In Liquidation)

Third Respondent
SOUTH AFRICAN CIVIL AVIATION
AUTHORITY
Fourth Respondent

Coram:
HARMS
ADP,
SCOTT,
MTHIYANE,
NUGENT
JJA
and
MHLANTLA AJA
Heard:
19 NOVEMBER 2007
Delivered:
29 NOVEMBER 2007

Summary: Civil procedure ─ preservation order ─ sale of goods in
foreign jurisdiction

Neutral Cititation:  This judgment may be referred to as Carmel
Trading Company Limited v CSARS [2007] SCA 160 (RSA)

HARMS ADP/

HARMS ADP

[1] A Falcon 900B executive jet has been languishing at the Dassault
maintenance facility at Le Bourget Airport near Paris, France, since 3
April 2003. The respondent, the Commissioner for the SA Revenue
Services, wishes to have the Falcon (with registration number ZC-DAV)
sold and the proceeds kept in trust pending the finalisation of an action
instituted by the Commissioner against one David Cunningham King and
a number of corporate entities. The Commissioner contends that King and
a company of his, Ben Nevis Holdings Ltd, have a substantial income tax
liability and that the other defendants were, and are, being used by King
to conceal his assets. (King was assessed to tax for more than R900
million and Ben Nevis for more than R1 400 million as long ago as
February 2002.) One of these companies is Carmel Trading Co Ltd, the
present appellant, and the only entity opposed to the sale of the Falcon.

[2] The Falcon has always been and still is registered in South Africa
with the local civil aviation authorities in the name of Hawker Air
Services (Pty) Ltd (‘HAS’), a company liquidated by order of this Court
on 31 March 2006.1 The holding company of HAS was Metlika Trading
Ltd. HAS was an equal partner with Hawker Management (Pty) Ltd
(‘Manco’) in a partnership known as Hawker Aviation Services
Partnership and the partnership was the beneficial owner of the Falcon.
However, Rand Merchant Bank (‘RMB’) is said to have been an
undisclosed partner holding a 99.8 per cent interest in the Falcon. The
Commissioner has an additional VAT related claim against both HAS and
the partnership of some R73 million.

1 Commissioner, South African Revenue Services v Hawker Air Services (Pty) Ltd 2006 (4) SA 292
(SCA).

[3] On 3 September 2002, Hartzenberg J issued a preservation and
anti-dissipation order in relation to the Falcon. Such an order, which
interdicts a respondent from disposing of or dissipating assets, is granted
in respect of a respondent’s property to which the applicant can lay no
special claim. To obtain the order the applicant has to satisfy the court
that the respondent is wasting or secreting assets with the intention of
defeating the claims of creditors. Importantly, the order does not create a
preference for the applicant to the property interdicted.

[4] But on 5 September 2002 and in spite of the order Carmel ‘took
over’ the interests of RMB and Manco. Carmel’s attitude was that since it
was not bound by the order it could do so. Under normal circumstances
such a taking over would have had the effect of putting an end to the
existing partnership and creating a new one. In a later judgment on 18
February 2003, Hartzenberg J extended the preservation and anti-
dissipation order and ordered Carmel to return the Falcon to South
Africa.2 (The Falcon had previously been flown out of the country for
fear of an attachment by the Commissioner.) He held, in the course of his
judgment that the sale of the interests in the Falcon to Carmel was ‘a
contrived transaction, in fraudem legis, to by-pass the preservation order’
and that Carmel was but a tool of King and under his direct control.

[5] Carmel and the other interested parties obtained leave to appeal to
this Court. In the event this Court dismissed the appeal by Carmel and the
already mentioned factual findings of Hartzenberg J were foundational to

2 The different orders are quoted in Metlika Trading Ltd v Commissioner, SA Revenue Services 2005
(3) SA 1 (SCA).

its judgment.3 An application for leave to appeal to the Constitutional
Court was dismissed.

[6] The Commissioner earlier had sought an order implementing the
order to return the Falcon to South Africa pending the finalisation of the
said appeal. This had been refused, in part because of a perjured affidavit
filed on Carmel’s behalf that the Falcon was safely stored and protected
in a hangar at Le Bourget. Another reason was that the aviation
authorities had grounded the Falcon on 3 April 2003.

[7] The Falcon remained put at Le Bourget and this led to a contempt
application against, amongst others, King, HAS and Carmel. King,
conveniently, had resigned as director of HAS and this, according to
Botha J (who heard the contempt application), meant that he could not be
held liable for the breach of the order by HAS. After the dismissal of the
contempt proceedings King was reinstated as the sole director of HAS. In
any event, since the respondent parties involved ‘displayed a willingness
to cooperate in bringing about the return of the Falcon to South Africa’,
Botha J held that in consequence a committal would be inappropriate.4 He
made an order that would ‘hopefully have the effect of bringing the
Falcon back’. It did not. Metlika, who was supposed to provide the
finance for the return of the Falcon, withdrew its financial support;
Carmel refused to make any funds available for returning the Falcon; and
Carmel refused to give consent to the sheriff to return the Falcon to South
Africa.

3 Metlika Trading paras 18 and 35.
4 Botha J was also not prepared to judge the role of King in Carmel. Why he did not consider himself
bound by the findings of Hartzenberg J does not appear from his judgment.

[8] Carmel, for a reason not disclosed, does not want the Falcon back
in the country. It sought to register it in Mauritius and the High Court had
to interdict it from doing so. It also made a non-binding offer according to
which it would consent to the return of the Falcon provided the liquidator
of HAS and the Commissioner release the necessary funds and that it be
registered in Mauritius and be used by Carmel for chartering business
(the other conditions need not be mentioned – there were many).  Once
again, it failed to disclose why it wished to have the aircraft removed
from the local register, and counsel could not suggest a reason.
Otherwise, its attitude is that the Commissioner must carry the risk of
paying for the repair and maintenance of the Falcon in order to have it
returned. But, as I shall show in due course, Carmel as partner or ex-
partner is not entitled to the use of partnership property especially in the
absence of the consent of the other partner or (as in this case) the
liquidator of HAS. In addition, the undisputed evidence of one Steyn was
that it would probably not be profitable to use the Falcon for charter
purposes only.

[9] At the time of the preservation order the value of the Falcon was in
the vicinity of R200 million. Although King, in previous matters, created
the impression that the Falcon was kept in a hangar, the fact of the matter
is that it was never so kept. This misrepresentation has not been
explained. In any event, it is common cause that the Falcon is fast
deteriorating and will soon be basically worthless. To keep it stored in a
hangar will only reduce the rate of depreciation but will cost some
R150 000 per month. This means that the preservation order has become
meaningless unless amplified. The High Court, this time per Preller J,
accordingly issued a variation order to the effect that the Falcon should be
sold by the sheriff and the proceeds kept in trust in an interest bearing

account pending the outcome of the action. It is this order, which is with
the leave of the court below, that is the subject of the present appeal. The
detailed terms of the order need not be quoted because the appeal is not
directed against the terms of the order but against any sale of the Falcon.

[10] The Commissioner, in the founding affidavit, stated that in the light
of the history of the case the behaviour of the new partnership to leave the
Falcon stranded and neglected in a foreign country is an obvious and
desperate attempt to prevent our courts from eventually making an
effective order in respect of this valuable asset. He also alleged that
King’s apparent attitude is that he must at all cost prevent the Falcon
from being brought under the control of the court in the hope that
something may happen which will make the Falcon or its value available
to him in a foreign country. And, concluded the Commissioner, failing
this King is ‘patently prepared to see the value of the Falcon lost rather
than being utilised to pay’ the Commissioner. These allegations have not
been controverted.

[11] As Streicher JA pointed out –

‘An interdict at the instance of a creditor preventing his debtor, pending an action
instituted or to be instituted by the creditor, from getting rid of his assets to defeat his
creditors has for many years been recognised in our law [Knox D’Arcy Ltd v Jamieson
1996 (4) SA 348 (A) at 372C–F]. It is similar to the Mareva injunction in English
law.’5

He also quoted6 Lord Donaldson of Lymington MR7 who said:

5 Metlika para 35. See also Voet 2.4.18
6 Metlika para 44.
7 Derby & Co Ltd and others v Weldon and others (No 2) [1989] 1 All ER 1002 at 1007f–g.

“We live in a time of rapidly growing commercial and financial sophistication and it
behoves the courts to adapt their practices to meet the current wiles of those
defendants who are prepared to devote as much energy to making themselves immune
to the courts’ orders as to resisting the making of such orders on the merits of their
case.”

[12] I agree with Mr van der Merwe (who, on behalf of the liquidator of
HAS, supported the Commissioner and the judgment of Preller J) that,
considering the purpose of a preservation order, all the high court was
asked to do was to authorise the conversion into cash of a deteriorating
asset, which already was the subject of a preservation order. It should be
emphasised that previously in this Court Carmel and its associates did not
contend that the Commissioner had not established the requisites for a
preservation order. Their case concerned the jurisdiction of the court,
arguing that the high court did not have jurisdiction because of the
doctrine of effectiveness. This argument was rejected but an attempt to
resuscitate it before us likewise has to be rejected.

[13] Carmel’s opposition to the sale of the Falcon can only be described
either as conduct animo vicino nocendi, or ‘Schadenfreude’ (according to
Mr Gauntlett for the Commissioner), or to use an old Dutch phrase, ‘uyt
enckele
spijt
ende
kregelheydt’
(merely
out
of
spite
and
obstreperousness). It reminds one of the farmer who in order to escape
paying tithe destroyed his whole crop.8 The Romans had a short answer
for such conduct: ‘Malitiis non indulgendum esse’ – there must be no
indulgence to malice.9 Carmel’s objection lacks reality.10

8 Van der Merwe & Olivier Die Onregmatige Daad in die Suid-Afrikaanse Reg 6 ed p 64 fn 21.
9 Digesta 6.1.38 (Celsus). The translation is that of Watson.  See the chapter with this name in JE Spruit
Metopen: Verzamelde Essays over het Romeinse Recht en zijn Geschiedenis (2002) p 251.
10 MV Spirit of Namibia: Big Red One v Marco Fishing (Pty) Ltd 2006 (6) SA 309 (SCA) para 14.

[14] Mr Labuschagne’s counter on behalf of Carmel was based on s
25(1) of the Bill of Rights, which provides that ‘no law may permit
arbitrary deprivation of property’. He says that an order to sell the
property and keep the proceeds in trust pending the finalisation of the
main litigation amounts to an arbitrary deprivation of Carmel’s property.
This argument breaks down at many levels.

[15] Carmel’s first problem is that the Falcon is not Carmel’s property.
Carmel may have had a proprietary interest in the Falcon in its capacity
as partner in the partnership that was the beneficial owner of the Falcon.
However, as I have pointed out, the ‘taking over’ of Manco and RMB’s
partnership interest was fraudulent and Carmel cannot rely on a simulated
and fraudulent agreement.11 There is a second point. The partnership
(whether the old or the new one) was dissolved by the liquidation of one
of the partners, namely HAS. A former partner has no proprietary claim
in respect of the property of a dissolved partnership. The claim is at best
for a proportionate share of the proceeds after liquidation of the
partnership because, as Prof Beinart mentioned, common partnership
property falls for division between the partners on dissolution, which, in
the case of an indivisible object such as the Falcon means that it has to be
liquidated.12

[16] The next problem Carmel has is that the sale will not amount to a
deprivation. If there was any deprivation it was when Hartzenberg J
issued the preservation order. The object of the order of Preller J was to
replace an asset, which is deteriorating. Carmel’s position will not, after a

11 Cf Wells v South African Alumenite Co 1927 AD 69.
12 B Beinart ‘Capital in Partnership’ 1961 Acta Juridica 118 at 146.

sale, be any different from what it is now. No one is divested of anything
on a permanent basis. The value of the asset is being retained for both the
owner and those creditors who, eventually, would be entitled to execute.13
When asked what the act of deprivation relied on is, counsel said that it
was the sale coupled with the retention of the proceeds in trust because
Carmel will not have access to the money before the finalisation of the
main case. Since Carmel does in any event not have the use of the Falcon
the argument is not understood.

[17] Whether the order to sell or the sale is ‘arbitrary’ depends on
whether there is sufficient reason for the deprivation and whether it is
procedurally fair; both are factual issues.14 There can, on the facts recited,
be no doubt that the deprivation in this case is by no means arbitrary. The
decision to order the sale was taken after a procedurally fair hearing and
the reason for the sale is quite obvious. Carmel’s argument on the point
did not address the constitutional test. Instead, counsel said that the order
created a security for the Commissioner which he did not have. That
argument is without any merit because, as indicated at the outset of this
judgment, a preservation order does not create any security or precedence
for the applicant creditor. Another complaint was that the proceeds are to
be kept in trust by the attorneys of the Commissioner pending the
finalisation of the matter. This, according to the argument gave the
Commissioner control over the money, which is nonsense. The money is
kept in trust on behalf of the owner of the Falcon. The only effect of the
order is that the owner may not dissipate it pending the main case.  I
should note that there was no attack on the ability or competence of the

13 Cf Harksen v Lane NO 1998 (1) SA 300 (CC) para 35-37.
14 For the meaning of the term: First National Bank of SA Ltd t/a Wesbank v Commissioner SA Revenue
Service 2002 (4) SA 768 (CC) para 100.

attorney to hold the money in trust and Carmel did not ask that the money
be kept in trust by someone else.

[18] Another argument of Carmel concerns the right of the sheriff to sell
the Falcon in the absence of an attachment. The argument is namely that
an order of court permitting the sheriff to sell something that has not been
attached amounts to an arbitrary deprivation of property. Since the logic
escapes me I am unable to deal with the argument any further. Another
related argument was that at common law a sheriff could only sell goods
that are deteriorating provided they had been attached. For this reference
was made to Voet’s Commentarius ad Pandectas 2.4.61 where Voet said
that goods detained by arrest that are not capable of preservation by
keeping may be sold under a court order. This section of Voet deals with
the effect of an arrest ad fundandam jurisdictionem and not with the
powers of a court. In other words, Voet did not suggest that courts may
only order the sale of attached goods; all he said was that perishable
goods that have been attached may be sold in terms of a court order.
Carmel also argued that it would be impermissible to use this example of
Voet as an analogy in order to make the preservation order effective –
why, counsel did not articulate. A similar argument about the court’s
power to develop the common law was rejected in Universal City Studios
Inc v Network Video (Pty) Ltd  1986 (2) SA 734 (A) by Corbett JA at
751G-I read with 754G-755A. Lastly, on the attachment point, the
submission was made that without an attachment the court cannot accept,
considering that the Falcon is not within the country, that the order could
be executed and that, accordingly, the doctrine of effectiveness has been
satisfied. The answer is to be found in Bid Industrial Holdings v Strang
[2007] SCA 144 (RSA) at para 55, namely

‘that the responsibility for achieving effectiveness, absent attachment, is essentially
that of the parties, and more especially the plaintiff.’

[19] I should in conclusion record one further argument – the others do
not justify any judicial time. Carmel relied on a preservation order issued
by a Crown Court in England prohibiting Carmel of disposing the Falcon.
A sale by the sheriff, said Carmel, would amount to a breach of that
order. It is not surprising that, although this was the main defence on the
papers, counsel did not press the non sequitur.

[20] The appeal is dismissed with costs, including the costs of two
counsel.

____________________
L T C  HARMS
ACTING DEPUTY PRESIDENT

CONCUR:

SCOTT JA
MTHIYANE JA
NUGENT JA
MHLANTLA AJA
THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

MEDIA SUMMARY – JUDGMENT DELIVERED IN THE SUPREME COURT OF APPEAL

From:  The Registrar, Supreme Court of Appeal
Date:  29 November 2007
Status: Immediate

Please note that the media summary is intended for the benefit of the media
and does not form part of the judgment of the Supreme Court of Appeal

CARMEL TRADING COMPANY LTD v THE COMMISSIONER FOR THE
SOUTH AFRICAN REVENUE SERVICE

The SCA today dismissed an appeal from the Pretoria High Court.

The appellant was a company which, it has been found previously, is a tool
and under the direct control of one David Cunningham King. King and another
company of his have been assessed to tax in 2002 for R900 m and R1400 m
respectively.

The appellant is said to be a partner in an executive jet. This jet is the subject
of restraint orders in South Africa and England and has been grounded in
France since 2003.

The Commissioner wishes to have the jet sold and the proceeds kept in trust
pending the finalisation of the litigation because the jet is deteriorating and
fast losing its value.

The Court held that the plane should be so sold in spite of the objection of the
appellant.

---ends---