REPUBLIC OF SOUTH AFRICA

IN THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

REPORTABLE

Case Number  :  119 / 02

In the matter between

L N  SACKSTEIN  NO [in his capacity as
liquidator of Tsumeb Corporation Limited
(in liquidation)]                                                                   Appellant

and

PROUDFOOT SA (PTY) LIMITED                                  Respondent

Composition of the Court :     OLIVIER, BRAND, CONRADIE  JJA;
HEHER and LEWIS  AJJA

Date of hearing :

22 NOVEMBER 2002

Date of delivery :

7 MARCH 2003

SUMMARY

Liquidation of external company  -  powers of South African liquidator to impeach
dispositions having their origin in a foreign country.
________________________________________________________________

J U D G M E N T
________________________________________________________________

OLIVIER  JA

[1] The present appeal deals with the powers of the liquidator of an
external company registered in South Africa to impeach transactions
having their origin in a foreign country.
[2] Tsumeb Corporation Limited ('Tsumeb') was incorporated as a
company in the Republic of Namibia.   It is registered as an external
company in the RSA under the same name in accordance with the
provisions of s 323 of the South African Companies Act 61 of 1973
('the Companies Act') and with a registered office in Johannesburg.
For the sake of clarity I will refer to the external company registered
in Johannesburg as 'Tsumeb SA'.   It was, therefore, at all relevant
times a body corporate in the RSA liable to be wound up as such

under the provisions of the Companies Act and otherwise subject to
the provisions of that Act.
[3] Proudfoot SA (Pty) Ltd ('the Defendant') is a company duly
incorporated and registered according to the laws of the RSA, which
carried on business as industrial consultants specialising in
productivity and quality management and with principal place of
business in Johannesburg.
[4] During or about October 1997 Tsumeb concluded a contract
with the Defendant in Namibia in terms of which the Defendant
undertook to render certain services to the former in Namibia.   In
return for rendering those services the Defendant was to be paid a
total amount of R10 million in fixed weekly instalments.   It is common
cause that by 29 July 1998 Tsumeb had made payments totalling R5
708 957,00 to the Defendant.

[5] According to a statement of facts agreed upon by the parties, it
is also common cause that:
Tsumeb was placed under provisional liquidation by an order of
the High Court of Namibia on 29 April 1998 and a final winding
up order was granted by that court on 12 March 1999 (the
'Namibian liquidation order').   The provisional liquidators were
appointed on 29 April 1998 and the liquidators on 26 May 1999.
On 29 July 1998 Tsumeb SA was also placed in provisional
liquidation by an order of the High Court of South Africa
(Witwatersrand Local Division).   A final winding up order was
granted on 16 March 1999 (the 'South African liquidation
order').
The liquidators appointed in Namibia pursuant to the Namibian
liquidation did not seek an order in South Africa for their

recognition as liquidators to wind up the affairs of Tsumeb SA
in South Africa.
Mr Leslie Neil Sackstein was appointed as provisional liquidator
of Tsumeb SA on 11 August 1998 in terms of the South African
provisional liquidation order and as liquidator on 27 May 1999
in terms of the final order.
On 3 November 1999 the Defendant proved a claim at a
meeting of creditors of Tsumeb in Namibia in terms of the
relevant Namibian legislation.   The claim so proved was for the
balance said to be owing to the Defendant by Tsumeb under
the contract between those parties ie taking into account the
payments already made by Tsumeb to the Defendant.   These
payments are the subject of the present proceedings in South
Africa.

The Namibian High Court on 10 March 2000 sanctioned a
scheme of arrangement offered by Ongopolo Mining and
Processing Limited ('the scheme of arrangement') in terms of
section 311 of the Companies Act, Namibia, and discharged
the Namibian liquidation order on that date.   The order was
duly registered with the Registrar of Companies in terms of the
Namibian Companies Act.   The liquidators appointed in
Namibia were discharged from office on 10 March 2000 and
their statutory powers terminated on that date.
[6] Subsequent to the discharge of the liquidation order of Tsumeb
in Namibia on 10 March 2000, Mr Sackstein, as liquidator of Tsumeb
SA, instituted action in the Witwatersrand Local Division of the High
Court against the Defendant for recovery of the amount mentioned
above.   He averred that each of the payments made by Tsumeb to

the Defendant was made at a time when the liabilities of Tsumeb
exceeded the value of its assets, and that the effect of all of those
payments was to prefer the Defendant above the other creditors of
Tsumeb.   He alleged that by virtue of the provisions of ss 29 (1) and
30 of the South African Insolvency Act, 24 of 1936 ('the Insolvency
Act') as read with s 340 of the Companies Act, the Defendant is
obliged to repay the aforesaid amount to him in his capacity as
liquidator.
[7] To this claim the Defendant pleaded that the payments made
by Tsumeb to the Defendant were dispositions by 'Tsumeb Namibia'
of its assets.   The Plea continued:
'4.2
Tsumeb Namibia's assets exceeded the value of its liabilities
and Tsumeb Namibia was able to pay its debts at the time of
institution of the action, Tsumeb Namibia having been
discharged from liquidation on 10 March 2000 by Order of
the Namibian High Court.

4.3
Alternatively, the Defendant denies that Tsumeb's liabilities
exceeded the value of its assets and that Tsumeb was
unable to pay its debts at the time of institution of the action
or at any other material time.

4.4
In the premises Sackstein as Liquidator of Tsumeb is
precluded from relying on the provisions of Sections 29 (1)
and 30 of the Insolvency Act 24 of 1936 read with Section
340 of the Companies Act.

4.5
Further alternatively, the Defendant pleads that in the event
of it being found that payment of amounts totalling R5 708
957,00 were made at a time when the liabilities of Tsumeb
Namibia alternatively Tsumeb exceeded the value of its
assets and that Tsumeb Namibia alternatively Tsumeb was
unable to pay its debts, and that the effect of the payment of
R2 637 927,00 was to prefer the Defendant above the other
creditors of Tsumeb Namibia alternatively Tsumeb (all of
which is denied) -

4.5.1 the payments made by Tsumeb Namibia were
dispositions of its assets;

4.5.2 Sackstein as the Liquidator of Tsumeb has no
jurisdiction or power to seek to set aside dispositions
by Tsumeb Namibia of its assets; ...'.

[8] The parties agreed that if the Plaintiff's contentions were upheld
paragraphs 4.4 and 4.5.2 of the Plea should be struck out and the
Defendant should be ordered to pay the costs consequent upon the

preparation and argument of the stated case, such costs to include
those consequent upon the employment of two counsel.   If the
Defendant's contentions were upheld the claim set out in paragraphs
3 to 8 of the particulars of claim should be struck out and the Plaintiff
ordered to pay the costs consequent upon the preparation and
argument of the stated case, such costs to include those consequent
upon the employment of two counsel.
[9] At the beginning of the argument before Blieden J in the court a
quo, the parties further agreed that the payments made by Tsumeb
to the Defendant were by way of credit transfers from Tsumeb's
banking account in Namibia to the Defendant's account in South
Africa.
[10] The issue is whether or not Sackstein, on the given facts, had
the power to institute and prosecute the claim based on the

impeachment provisions of ss 29 and 30 of the Insolvency Act as
read with s 340 of the Companies Act.
[11] The court a quo decided against Sackstein, in essence holding
that the dispositions occurred in Namibia and, accordingly, that the
South African liquidator had no powers in respect thereto.
[12] There are three preliminary matters that are relevant to the
outcome of this appeal that should be noted.
[13] The first is that it is common cause, but essential to emphasise,
that the company Tsumeb Corporation Limited, registered as such in
Namibia, subsequently obtained registration as an external company
under the same name in the RSA in terms of s 322 of the Companies
Act, and not under s 335 of that Act.   In such a case, s 323 provides
that

' ... the external company shall be a body corporate in the Republic
subject to the applicable provisions of the Act.'

An external company may be wound up by the Court like a
domestic company, because s 337 of the Companies Act defines a
company as including an external company.

From this it follows that an external company registered as
such in the RSA may be liquidated as if it were an independent entity
even if the foreign company to which it is 'related' is not liquidated or
dissolved, and vice versa:  if Tsumeb was liquidated or dissolved in
Namibia, Tsumeb SA could carry on its business here and could not
be wound up unless the grounds for winding up specified in s 344
were proved to be present.
[14] Secondly, as clearly appears from the judgment of this Court in
Ward v Smit and Others  :  In re Gurr v Zambia Airways Corporation

Ltd 1998 (3) SA 175 (SCA) at 183 H - I, there may be two
simultaneous and concurrent liquidation processes in respect of the
company, one in its original country of incorporation (in this instance
Namibia) and another in the country in which it is registered as an
external company (here South Africa).   In such a case each
liquidator may deal independently with the assets and liabilities of the
company in respect of which he or she is liquidator (Ward v Smit,
supra at 184 A - B).
Consequently, in the present case, the withdrawal of the
Namibian liquidation process could not per se affect the South
African process.   If, in the Namibian process, certain compromises
were reached or claims waived (as is alleged in the pleadings), the
Defendant would obviously be entitled to rely on such defences if the
dispute is to be continued.   The question now under consideration is

whether the claim by Mr Sackstein can pass the first hurdle, viz his
powers to institute the claim.
[15] Thirdly, it must be accepted that the registration in the RSA of
an external company does not result in there being two separate
legal personae, registered respectively in two countries (see
Wiseman v Ace Table Soccer (Pty) Ltd 1991 (4) SA 171 (W) at 173
E;  Ward v Smit and Others : in re Gurr v Zambia Airways
Corporation Ltd, supra;  C F Forsyth, Private International Law,
(1996) 3 ed, at 182 n 280).   There is only one legal persona,
registered in two countries.
The consequence of this situation can obviously lead to
seemingly irreconcilable conflicts of authority and powers between
two simultaneous and concurrent liquidators, and hence to difficult
legal and commercial problems.   In cases of dual registration, a

principle of demarcation in the event of a dispute between the
liquidators will have to be developed.
In the present case, the problem does not present itself as a
conflict between two liquidators.   The question is merely whether Mr
Sackstein has the power under our law  to impeach the dispositions
now under discussion.
[16] The crux of the Defendant's case is that the South African
liquidator, in relying on sections 29 (1) and 30 of the Insolvency Act,
is only empowered to set aside dispositions by the company in
liquidation of its property, but only if the disposition related to property
in the Republic of South Africa.   If the disposition occurred in respect
of property situate outside the RSA, a South African liquidator is
powerless to impeach it.   In the present case, so it was argued, the
disposition when it was effected occurred in respect of property not in

the RSA but situate in Namibia.   The Appellant's riposte is that he
derives his powers to impeach a disposition from ss 29 (1) and 30 (1)
of the Insolvency Act and s 391 of the Companies Act, and that the
limitation on his powers, sought to be found by the Defendant in the
definition of 'property' in s 2 of the Insolvency Act, does not, on a
proper interpretation of the relevant sections, exist.
[17] Sec 29 (1) of the Insolvency Act reads as follows:
'29 (1)
Every disposition of his property made by a debtor not
more than six months before the sequestration of his
estate or, if he is deceased and his estate is
insolvent, before his death, which has had the effect
of preferring one of his creditors above another, may
be set aside by the court if immediately after the
making of such disposition the liabilities of the debtor
exceeded the value of his assets, unless the person
in whose favour the disposition was made proves that
the disposition was made in the ordinary course of
business and that it was not intended thereby to
prefer one creditor above another.'

Section 30 (1) reads:

'30 (1) If a debtor made a disposition of his property at a time when
his liabilities exceeded his assets, with the intention of preferring
one of his creditors above another, and his estate is thereafter
sequestrated, the court may set aside the disposition.'

It is thus correct, as the Defendant argued, that the attack on a
disposition is always connected to a disposition of property.
[18] Property is defined in s 2 of the Insolvency Act as follows:
' ..."property" means movable or immovable property wherever
situate within the Republic ...'

Taken literally, these provisions appear to support the
Defendant's argument that Mr Sackstein is not empowered to
impeach the transactions by Tsumeb of its property in Namibia, even
though the Defendant may be subject to the jurisdiction of the court
which appointed Mr Sackstein as liquidator.

[19] On behalf of Mr Sackstein it was argued that the words in s 2
on which the Defendant relies, should not be given its literal meaning.
Reference was made to the view of Mars, The Law of Insolvency in
South Africa, [1988] 8th ed. by E de la Rey, at 176, viz:
'The definition of property contained in the Act suggests at first
sight that only assets situated within the Republic of South Africa
pass on insolvency to the insolvent's trustee, but it seems that the
true intention of the legislature in defining property as it did was
rather to extend the operation of a sequestration order beyond the
territorial limits of the particular division of the Supreme Court
granting it, than to narrow it.   Consequently, it seems that the
common law must still be applied in deciding the extent to which
the insolvent's assets, which are situated in a foreign country, pass
to his trustee.'

[20] I consider the explanation by Mars to be correct.   Such an
interpretation of s 2 of the Insolvency Act would accord with s 391 of
the Companies Act, which reads as follows:
'A liquidator in any winding-up shall proceed forthwith to recover
and reduce into possession all the assets and property of the
company, movable and immovable, shall apply the same so far as

they extend in satisfaction of the costs of the winding-up and the
claims of creditors, and shall distribute the balance among those
who are entitled to it'

[21] In the result, the words 'wherever situate within the Republic' in
the definition of 'property' in s 2 of the Insolvency Act, can be ignored
as far as proceedings for setting aside dispositions by virtue of the
Insolvency Act are concerned.
[22] In terms of s 391 of the Companies Act it is the duty of the
liquidator ' ... forthwith to recover and reduce into possession' all
such assets and property.   This means that the liquidator must take
all steps necessary to fulfil the prescribed duty.   In the case of
voidable transactions, he must take the steps that are necessary for
the impeachment of the transaction.   This he can do in the Republic
of South Africa, irrespective of where the property is situate.   If he
succeeds in impeaching the transaction, and if the property is in fact

situate outside the Republic, he has by virtue of the common law
(see Re Estate Morris 1907 TS 657 at 666 in respect of movables
and Ex parte Stegmann 1902 TS 40 at 52 in respect of immovables)
no extra-territorial powers of recovering such property in a foreign
country.   The correct procedure is then to seek the recognition of the
court order obtained in South Africa, setting the transaction aside, in
the applicable foreign country (see Ex parte Stegmann, supra, at 52).
[23] There is authority for the view that impeaching a transaction
and the subsequent vindication of the property concerned are two
distinct steps in the process of recovery of the relevant assets.

In the matter of In re Leslie Engineers Co Ltd (In liquidation)
[1976] 1 Weekly Law Reports 292, Oliver J, in the Chancery Division,
had to deal with an application by a liquidator to have declared void
two payments made by the company after the commencement of the

winding up of the company.   Section 227 of the English Companies
Act of 1948 at the time read as follows:
'In a winding up by the court, any disposition of the property of the
company, including things in action, and any transfer of shares, or
alteration in the status of members of the company, made after the
commencement of the winding up, shall, unless the court otherwise
orders, be void.'

On behalf of the liquidator it was argued that if the disposition is
voided, the liquidator acquires the right to recover the property.
Oliver J at 298 B - D found this argument too wide:
'Now, it must be remembered that the invalidation of a disposition
of the company's property and the recovery of the property
disposed of, are two logically distinct matters.   Section 227 says
nothing about recovery;  it merely avoids dispositions ... What is the
appropriate remedy in respect of the invalidated disposition is a
matter not regulated by the statue and that has to be determined by
the general law ...'

[24] In Herrigel NO v Bon Roads Construction Co (Pty) Ltd and
Another 1980 (4) SA 669 (SWA) Lichtenberg J at 678 A - B pointed

out that     s 227 of the English Companies Act has its counterpart in
s 341 of the South African Companies Act.   Similar to the English
provision,   s 341 (2) of our Companies Act gives the court a
discretion not to declare a disposition made after the commencement
of winding up proceedings void.    On the facts the learned judge
refused to exercise his discretion not to invalidate the 'void'
disposition (at 680 G).   The question then arose:  can the first
defendant who had received the benefit of the void payment by the
company in liquidation, be ordered to repay same to the liquidator?
It is in this connection that the learned judge following Leslie
Engineers remarked, at 680 H, that s 341 (2) of the Companies Act
says nothing about the recovery of the void disposition but merely
avoids the disposition itself.   That is, as I have pointed out, also the
position under s 227 of the English Companies Act.

[25] The essence of the Appellant's case then is that the invalidation
part of the process is not governed by the provisions relating to
recovery of the property disposed of.   The invalidation part is purely
an administrative process, governed by the ordinary rules pertaining
to the jurisdiction of the court.   In the present matter the court a quo
issued the winding up order, the liquidator was duly and lawfully
appointed, and the Defendant is domiciled within the area of
jurisdiction of the court a quo.   That court is endowed with
jurisdiction to entertain the impeachment process.
[26] This conclusion must not be read to mean that the South
African liquidator of an external company is obliged to institute
impeachment procedures in a South African court where the property
concerned is in a foreign country.   The effect of this judgment is that
the liquidator has a choice, either to proceed under s 391 of the

Companies Act or to follow the procedure whereby his appointment
as liquidator is recognised by the courts of the foreign country
concerned, and to prosecute the impeachment and recovery
processes in that country.
[27] In the event the appeal succeeds with costs.   The judgment of
the court a quo is set aside and paragraphs 4.4 and 4.5.2 of the Plea
are struck out.   The Defendant is ordered to pay the costs of the
action in the court a quo and the costs of the appeal including the
costs consequent upon the preparation of the stated case.   In both
the court a quo and this Court the costs awarded include those
consequent upon the employment of two counsel.

P J J  OLIVIER   JA
CONCURRING:

BRAND  JA
CONRADIE  JA
HEHER  AJA
LEWIS  AJA