THE SUPREME COURT OF APPEAL
REPUBLIC OF SOUTH AFRICA

JUDGMENT

Case number: 556/07

In the matter between:

DIETER SCHMIDT
APPELLANT

and

BIRGITTA WEAVING
RESPONDENT

Neutral citation: This judgment may be referred to as Dieter Schmidt v Birgitta
Weaving (556/07) [2008] ZASCA 123 (29 September 2008)

CORAM:
SCOTT, FARLAM, JAFTA, MLAMBO et MAYA JJA

HEARD:
11 SEPTEMBER 2008

DELIVERED:
29 SEPTEMBER 2008

SUMMARY:
Attachment of member’s interest in close corporation to
confirm jurisdiction – whether notice to corporation required – whether s 25 of
Close Corporations Act 69 of 1984 applicable.

___________________________________________________________

ORDER
___________________________________________________________

On appeal from: High Court, Cape Town (Desai J sitting as court of first
instance).

1.
The appeal succeeds with costs, including where they were employed
those of two counsel.

2.
The order of the court a quo is set aside and replaced by the following:
The special plea is upheld with costs, including those occasioned by
the employment of two counsel.

__________________________________________________________

JUDGMENT
___________________________________________________________

FARLAM JA (SCOTT, JAFTA, MLAMBO AND MAYA JJA concurring)

[1] This is an appeal from a judgment of Desai J, sitting in the Cape High
Court, in which the appellant’s special plea contesting the jurisdiction of the
high court in an action instituted against the appellant by the respondent was
dismissed.

[2] In the particulars of her claim which were annexed to her summons the
respondent gave the appellant’s address as ‘c/o Jan S de Villiers, Zomerlust
Estate, Berg River Boulevard, Paarl’, that is to say, the Paarl address of his
attorneys of record. Approximately sixteen months after the summons was
issued the respondent brought an ex parte application for an order authorising
the sheriffs of the court or their deputies to attach ad fundandam alternatively
ad confirmandam jurisdictionem the appellant’s ‘right, title, interest and/or
claims’ to certain of the appellant’s assets for the action which she had
instituted against the appellant. The assets to be attached were his member’s
interests in three close corporations, viz Le Cap International CC, TJ Walker

CC and Cape Skin Clinic CC. In her supporting affidavit in the application the
respondent stated that the appellant resides permanently in the United States
of America and is a peregrinus of the court’s area of jurisdiction. The relief
sought in the application included a prayer for leave to serve the summons
which had already been issued.

[3] The application was granted by Foxcroft J. Thereafter attempts were
made by the deputy sheriff of Simonstown (in respect of the member’s interest
in Cape Skin Clinic CC), the sheriff for Cape Town (in respect of the
member’s interest in TJ Walker CC) and the sheriff for Wynberg North (in
respect of the member’s interest in Le Cap International CC) to attach the
assets set forth in the court’s order at the registered offices of the close
corporations concerned.

[4] Approximately a month after these attempts were made, various
documents, including the summons in this matter, were served on the
appellant in the United States of America.

[5] The appellant filed a special plea to the jurisdiction of the court together
with a conditional special plea to one of the claims contained in the
respondent’s summons and a plea on the merits.

[6] In his special plea to the jurisdiction the appellant averred that he
resided permanently in the United States of America and is a peregrinus of
the court’s area of jurisdiction. He alleged further that the respondent was
prosecuting the action against him on the basis that his member’s interests in
the three close corporations to which I have referred had been attached to
found or confirm the court’s jurisdiction. He denied that any effective
attachment to found or confirm jurisdiction over him had taken place. Among
the bases on which he denied that there had been valid attachments of his
member’s interests were the following:
(a)
Rule 45(8) of the Uniform Rules had not been complied with;

(b)
the attachments purportedly carried out were not effected in conformity

with the requirements of the law; and

(c)
none of the purported attachments was effected under authority of a
writ of attachment.

[7] The issues raised by the special plea of jurisdiction were heard
separately pursuant to an order made by the Judge President of the High
Court in terms of Rule 33(4) of the High Court Rules. No evidence was led but
various documents were handed in from the bar.

[8] In his judgment dismissing the special plea, the learned judge in the
court a quo rejected a submission advanced by the respondent’s counsel,
relying on Anderson & Coltman Ltd v Universal Trading Company 1948 (1) SA
1277(W), that the appellant had adopted the wrong procedure. What he
should have done, so counsel had argued, was not to file a plea to the
jurisdiction but apply to set aside the order made by Foxcroft J. Desai J held
that the procedure adopted by the appellant was ‘at least permissible, if not
desirable for the reasons advanced by [the appellant’s] counsel.’ He held that
Rule 45, which deals with execution, does not apply to attachments to found
or confirm jurisdiction. He distinguished the case of Badenhorst v Balju,
Pretoria Sentraal 1998 (4) SA 132 (T), on which the appellant’s counsel who
appeared before him had relied, because, so he held, it was decided with
reference to the specific requirements of Rule 45(8).  He held that the giving
of notice to the Registrar of Close Corporations was the equivalent of
requesting a caveat to be noted in the records of the Registrar of Deeds. He
also held that the fact that the purported attachments were not effected under
writs of attachment was a defect of a rather technical nature which he was at
liberty to condone.

[9] Dealing with an attack on the effectiveness of the attachment, he held
that an attachment to found or confirm jurisdiction ‘does not provide an asset
in respect of which execution can be levied. It may have little or no value by
the time of execution. Furthermore, effectiveness is no longer a necessary
“criterion for the existence of jurisdiction.” (See: Tsung v Industrial

Development Corporation of SA Ltd 2006 (4) SA 177 at 181).’

[10] When the case was argued before us Mr Hodes, who appeared with
Ms Dicker on behalf of the respondent, indicated that in supporting the
judgment in the court a quo he was only relying on the purported attachment
of the appellant’s member’s interest in Le Cap International CC at its
registered office, 8 Hampton Avenue, Newlands. In the circumstances I shall
only summarise the evidence in so far as it relates to what happened at that
address.

[11] In a document headed ‘Notice of Attachment and Inventory to Confirm
Jurisdiction’ a deputy sheriff for Wynberg North stated that he attached the
appellant’s ‘right, title, interest, claim and demand in and to his 33 per cent
membership interest in Le Cap International CC’, the approximate value of
which he stated to be R1 000. In another document headed ‘TAX Invoice –
Order of Court to Confirm Jurisdiction’ which is signed by N L Botes, deputy
sheriff for Wynberg North, and which I shall assume is to be treated as a
deputy sheriff’s return, the following appears:
‘I certify that on 17 – May – 2005 at 11:00 at 8 HAMPTON AVENUE, NEWLANDS, I
handled the abovenamed process in the manner indicated below:

MANNER OF SERVICE/EXECUTION:
By proper service of a copy of the ORDER OF COURT TO CONFIRM
JURISDICTION & NOTICE OF ATTACHMENT AND INVENTORY upon the
respondent [who is described earlier in the document as the present appellant] by
affixing a copy thereof to the main door of the registered office of Le Cap
International CC at the above address.

PLEASE NOTE FURTHER THAT THE PRESENT OCCUPIER, MS FLEISCHER
STATES THAT THE RESPONDENT AND LE CAP INTERNATIONAL CC ARE
UNKNOWN TO HER.’

[12] On 18 May 2005 a letter was written on behalf of the sheriff for Wynberg
North to the Registrar of Close Corporations informing him that the appellant’s
interest in the close corporation had been placed under attachment and stating that

‘the aforementioned member’s interest may not be transferred while under
attachment. This office’, the letter continued, ‘will notify you in writing as soon as this
attachment has been uplifted. It will be appreciated if you could supply us with a copy
of the CK1 form [ie, the Founding Statement] for the abovementioned close
corporation.’

[13] In a further document emanating from the office of the sheriff for
Wynberg North, and signed by Deputy Sheriff A van der Vyver, it is stated that
a warrant of execution against movable property in this matter was handled as
follows:

‘By proper service of a copy of the ORDER OF COURT TO CONFIRM
JURISDICTION & NOTICE OF ATTACHMENT AND INVENTORY upon the
REGISTRAR OF CLOSE CORPORATIONS, PO BOX 429, PRETORIA, 001, by
prepaid registered post.’

[14] On 13 June 2005 a copy of the CK1 form relating to the close
corporation was certified to be a true copy by a senior administration clerk in
the employ of the Registrar of Close Corporations. It was presumably sent to
the Sheriff for Wynberg North in response to the request contained in his letter
of 18 May 2005 but it is not clear when he received it.

[15] Mr Rogers, who appeared on behalf of the appellant, attacked the
purported attachment of the appellant’s membership interest in Le Cap
International CC on several grounds, of which it is only necessary for me to
mention one, namely that in the absence of proof that the purported
attachment of the appellant’s membership interest had been brought to the
notice of the close corporation it was invalid. In support of this submission he
referred to what was said by Innes CJ, when giving the judgment of the
Transvaal Supreme Court in Reinhardt v Ricker and David 1905 TS 179. That
case was concerned with the attachment of an incorporeal, in that case a
mortgage bond, of which Reinhardt was the holder, to found jurisdiction. The
original bond was in Germany and a copy was attached and subsequently
sold in execution of a judgment against the bondholder by default. The copy

was ceded to the purchasers by the deputy sheriff and the cession was
registered. After the default judgment had been set aside the court held that
the sale in execution was invalidated by the absence of the original bond and
its non-attachment and that no title had been conferred on the purchasers. In
a passage in the judgment from pages 185 to 187 Innes CJ discussed how
incorporeals such as debts were attached in the old Dutch practice and in the
Cape and thereafter in the Transvaal. At p 187 he said this:

‘[T]he essential to be observed in all cases of the attachment of debts is that the
debtor should receive due notice, so that he may be warned not to discharge his
obligation to his original creditor, and so that he may have an opportunity of coming
to the Court for relief in case he wishes to raise the question of the validity of the
debt, or any lien, discharge or other matter which would operate in his favour.’

[16] Mr Rogers submitted further that as a member’s interest (like a share in
a company) is a bundle of incorporeal rights against the close corporation, the
close corporation can be likened to a defendant’s debtor in the case of an
ordinary debt. Thus for an effective jurisdictional attachment there has to be
actual notice to the corporation because the debtor must know that he or she
may not pay the debt to the defendant. Absent such knowledge, the position
after the purported attachment would be the same as it was before the
purported attachment and the relations between the debtor and the defendant
would be unaffected.

[17] Mr Rogers contended that the notice which was given to the Registrar
of Close Corporations took the case no further. Apart from the fact that the
Registrar was told, incorrectly, that the appellant’s member’s interest had
been attached, there was nothing that the Registrar could have done about
the matter and Desai J’s finding that the notice given to him was equivalent to
requesting a caveat to be noted in the records of the Registrar of Deeds was
incorrect. This was because the transfer of a member’s interest in a close
corporation – unlike the transfer of immovable property – requires no
participation by the Registrar.

[18] Mr Hodes endeavoured to answer Mr Rogers’s submissions on this
part of the case by arguing that notice to the corporation was not required for
an effective jurisdictional attachment of a member’s interest because the
equivalent of a caveat against transfer of the interest had been sought from
the Registrar and, alternatively, that there was in any event notice because of
the fact that a copy of Foxcroft J’s order was affixed to the main door of the
registered office of the corporation: in this regard he relied on s 25 of the
Close Corporations Act 69 of 1984.

[19] His first argument cannot be accepted. No reason was advanced for
rejecting the dictum of Innes CJ on which Mr Rogers relied, which is in accord
with both principle and practicality. Moreover Mr Rogers was clearly correct
when he submitted that a request for a caveat would not preclude the transfer
of the interest. See s 15(1) of the Act which provides for an amended founding
statement to be lodged where there is a change of membership within 28
days after such change.

[20] The second argument can, in my view, also not be accepted. Section
25 of Act 69 of 1984 reads as follows:

‘(1)
Every corporation shall have in the Republic a postal address and an office to
which, subject to subsection (2), all communications and notices to the corporation
may be addressed.

(2)
Any─

(a)
notice, order communication or other document which is in terms of this Act
required or permitted to be served upon any corporation or member thereof,
shall be deemed to have been served if it has been delivered at the registered
office, or has been sent by certified or registered post to the registered office
or postal address, of the corporation; and

(b)
process which is required to be served upon any corporation or member
thereof shall, subject to applicable provisions in respect of such service in any
law, be served by so delivering or sending it.’

[21] In my opinion the section takes the case no further. We are not
concerned here with a document which the Act requires or permits to be
served on a corporation nor with the service of process. For the reasons
underlying the requirement of notice in cases of this kind it is important that
actual notice be given and that the fact that the bundle of rights vesting in the
member has been attached must be known to the corporation.

[22] It follows that the purported attachment of the appellant’s member’s
interest in Le Cap International CC was invalid on this ground alone. This
conclusion renders it unnecessary to consider whether the attachment was
also invalid because the appellant’s certificate of his member’s interest issued
in terms of s 31 of the Act was not attached or whether the decision in
Badenhorst v Balju, Pretoria Sentraal, supra, can be distinguished and
whether certain of the dicta therein (especially at 138J - 139F) are correct. It is
also unnecessary in the circumstances to decide whether the purported
attachment was invalid because there was no writ of attachment.

[23] In my view a valid attachment was required in this case for the court to
have jurisdiction. It is true that to some extent the principle of effectiveness
has been eroded (Thermo Radiant Oven Sales Ltd v Nelspruit Bakeries 1969
(2) SA 295(A) at 300G-H) but as was pointed out in that case (at 309E-F and
see further Bid Industrial Holdings (Pty) Ltd v Strong 2008 (3) SA 355 (SCA)
at 363 F-H) jurisdiction will not be founded or confirmed if an article without
some saleable value is attached: a fortiori if no valid attachment takes place at
all.

[24] In the circumstances I am satisfied that the appeal must succeed.

[25] The following order is made:

1.
The appeal succeeds with costs, including where they were employed
those of two counsel.

2.
The order of the court a quo is set aside and replaced by the following:
‘The special plea is upheld with costs, including those occasioned by
the employment of two counsel.’

………………
IG FARLAM
JUDGE OF APPEAL

APPEARANCES:

FOR APPELLANT:
O L Rogers SC

Instructed by

Jan S de Villiers, Paarl

Hill, McHardy & Herbst Inc, Bloemfontein

FOR RESPONDENT:
P B Hodes SC

T A Dicker

Instructed by

Cliffe Dekker Inc, Cape Town

Claude Reid, Bloemfontein
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 SEPTEMBER 2008
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.

The Supreme Court of Appeal today allowed an appeal from a judgment of Mr
Justice S Desai, sitting in the High Court, Cape Town, in which he dismissed a
special plea brought by Dieter Schmidt, a resident of the United States of America,
against the jurisdiction of the Cape Town court to hear a damages claim brought
against him by Birgitta Weaving, who is resident in the Western Cape.

Mr Justice Desai had dismissed the special plea because, so he held, the court's
jurisdiction had been confirmed by the attachment in Cape Town of Schmidt's
member's interest in three South African close corporations.
Mr Justice IG Farlam, who delivered the judgment of the Supreme Court of Appeal,
which was concurred in by Mr Justice D G Scott, Mr Justice C Jafta, Mr Justice D
Mlambo and Ms Justice M Maya, said that on appeal Weaving's counsel had said
that they only relied on the attachment of Schmidt's member's interest in one close
corporation, Le Cap International CC. Mr Justice Farlam held that this attachment
was invalid because notice of it had not been given to the close corporation. In the
result the appeal was allowed with costs and Schmidt's special plea to the jurisdiction
of the Cape Town High Court was upheld.