Nurcha Finance Company (Pty) Limited v Sheriff of the High Court, Vryburg and Others (1525/04) [2006] ZANWHC 13 (16 February 2006)

IN THE HIGH COURT OF SOUTH AFRICA

BOPHUTHATSWANA PROVINCIAL DIVISION

CASE NO: 1525/04

In the matter between:

NURCHA FINANCE COMPANY (PTY) LTD

Applicant

and

THE SHERIFF OF THE HIGH COURT, VRYBURG First Respondent

NALEDI LOCAL MUNICIPALITY Second Respondent

JAPIE FRANCOIS STRYDOM Third Respondent

JANE STELLA MABASO Fourth Respondent

F. MOGALE Fifth Respondent

O.P. MATHLADISA Sixth Respondent

B. MPEMPE Seventh Respondent

HLUMANI BUILDING CONSTRUCTION

CIVIL (PTY) LTD Eight Respondent

BKZ HLUMANI JV Ninth Respondent

JAN CHRISTOFFEL ANTONIE VAN TONDER Tenth Respondent

CIVIL MATTER

DATE OF HEARING : 24 NOVEMBER 2005

DATE OF JUDGMENT : 16 FEBRUARY 2006

COUNSEL FOR THE APPLICANT : ADV J J PISTOR

COUNSEL FOR THE RESPONDENTS : ADV A J SWART

JUDGMENT

HENDRICKS J:

[1] This is an application by the Applicant, Nurcha Finance Company (Pty) Ltd for a declaratory order declaring the attachment on 06 May 2005 of the right, title and interest in and to certain monies held by the Second Respondent allegedly on behalf of the Third to Eight Respondents, effected by the First Respondent, in favour of the Tenth Respondent in case number 1524/2004 invalid and void ab initio and an order directing the Second Respondent to make payment of the amount of R408 370-10 to the Applicant.

[A] The Parties:

The Applicant:

[2] The Applicant is Nurcha Finance Company (Pty) Ltd, a company doing business of money lending to emerging contractors and also the rendering of construction support services.

The Respondents:

[3] The First Respondent is the Sheriff of the High Court, Vryburg.

[4] The Second Respondent is the Naledi Local Municipality.

[5] The Third Respondent is Japie Francois Strydom.

[6] The Fourth Respondent is Jane Stella Mabasu.

[7] The Fifth Respondent is Friedah Mogale.

[8] The Sixth Respondent is Ote Piet Matlhadisa.

[9] The Seventh Respondent is Mandla Abednego Mpempe.

[10] The Eight Respondent is Hlumani Building Construction Civil (Pty) Ltd.

[11] The Ninth Respondent is BKZ Hlumani JV.

[12] The Tenth Respondent is Jan Christoffel Antonie van Tonder.

Only the Tenth Respondent opposes this application.

[B] Background:

[13] On the 12th July 2004 at Vryburg, the Second Respondent concluded two written agreements with the Ninth Respondent. In terms of these agreements, the Ninth Respondent was obliged to erect 556 subsidy houses at Huhudi and Colridge Townships in Vryburg and 398 subsidy houses at Stella, in the district of Vryburg.

[14] In order to facilitate the aforesaid building projects and in order to supply the Ninth Respondent with working capital, the Applicant and the Ninth Respondent entered into two written loan agreements.

[15] The Applicant’s paymaster (“Tusk Construction Support Service (Pty) Ltd”) at the request of the Ninth Respondent, also caused performance guarantees to be issued to the Second Respondent. The Applicant’s paymaster in turn bound itself as surety to the guarantors for the due fulfillment of the obligations of the Ninth Respondent.

[16] In order to secure the financial position of the Applicant, the Applicant obtained a cession by the Ninth Respondent of all its rights, title and interest in and to any and all progress payments due by the Second Respondent to the Ninth Respondent. The existence of the aforementioned cession was duly communicated to the Second Respondent who acknowledged the existence thereof in writing.

[17] The Applicant also obtained “step-in undertaking consents” from the Second Respondent allowing the Applicant, in the event of cancellation of the main building agreements, to intervene and complete the building projects in the Ninth Respondents stead. The basis for this “step-in undertaking” is the cession.

[18] The main building agreements between the Second Respondent and the Ninth Respondent were duly cancelled during January 2005. The Applicant in terms of the “step-in undertaking consent” intervened and commenced the completion of the building work, which the Ninth Respondent had undertaken in terms of the contract, which had been cancelled.

[19] At the time of cancellation of the contracts certain monies were due by the Second Respondent (Naledi Local Municipality) in respect of work done by the Ninth Respondent. The accounts were evaluated and certified by the engineers of the Second Respondent, which certificates acknowledge the indebtedness of the Second Respondent of these accounts to the Ninth Respondent.

[20] In terms of the aforementioned loan agreements between the Ninth Respondent and the Applicant, Ninth Respondent had ceded to the Applicant all its pledged rights including their contract income. These cessions were acknowledged by the Second Respondent.

[C] The Dispute:

[21] The Applicant contends that it is entitled to the aforesaid amount of money by virtue of the personal rights acquired through valid cessions from the Ninth Respondent. The Tenth Respondent, a supplier of building material to the Ninth Respondent, had sued members of the Ninth Respondent and obtained default judgment against them.

[22] He then instructed the Sheriff of Vryburg (First Respondent) to attach the funds (“contract income”) payable to the Ninth Respondent, which he did. The Applicant attacks the validity of the said attachment on two grounds, namely:-

[a] It is contended that the Ninth Respondent had been diverted of its rights to receive any money (“contract income”) from the Municipality (Second Respondent) and therefore it had no right to the money held by the Second Respondent. It is contended that the attachment is therefore invalid.

and;

[b] It is secondly contended that the attachment is procedurally flawed in that the Sheriff did not comply with the procedure laid down by Rule 45(8) of the Uniform Rules of Court.

[23] I will now deal separately with these two contentions.

[a] The cession:

[24] An absolute cession serves to divest a cedent completely of his right to action.

See: Goodmin Stable Trust v Duo Hex (Pty) Ltd and Another 1998 (4) SA 606 (C).

[25] In Vryburg v Walters NO 2001 (2) SA 127 (C) Conradie J states the following on pages 129 G – 130 D:-

“Whether the cession was an out-and-out one or, as Davidson maintains it was, a cession in securitatem debiti. Its effect was to divest the cedent of his claims against the estate and to vest them in the cessionary. In December 1998 when the action was instituted the cedent was no longer a creditor of the insolvent estate.”

[26] It is clear that the loan agreements were entered into between the Applicant and the Ninth Respondent because these agreements were signed “For: BKZ Hlumani Joint Venture” by J.S. Mabaso and M.A. Mpempe.

[27] An extract of a resolution of the Joint Ventures of BKZ Hlumani Joint Venture (Ninth Respondent) also indicates that it was resolved inter alia, that Ms Jane Stella Mabaso and Mandla Abednigo Mpempe acting in their capacities as Joint Ventures of the borrower were authorized and empowered to:-

“2.1 negotiate the final terms and conditions of the agreement and power of attorney referred to in the preceding resolution; and

sign the said agreement and power of attorney and all other deeds or documents which may be necessary for the implementation of the abovementioned agreement and power of attorney; and

generally do everything that may be necessary for the implementation of the abovementioned agreement and power of attorney,

and any agreement, deed or documents signed by the said Ms Jane Stella Mabaso and Mandla Abednigo Mpempe acting under authority of this and the preceding resolution, shall conclusively be deemed to be the agreement, power of attorney, deeds and documents authorized by this and the preceding resolution.”

[28] It is clear that the borrower is the Ninth Respondent and the lender is the Applicant. The aforementioned two persons Mabaso and Mpempe signed Suretyship and Co-principal Debtor Undertakings jointly and severally with the Ninth Respondent. There is therefore no doubt that these two persons were duly authorized to act for and on behalf of the Ninth Respondent.

[29] The step-in undertaking consent indicates that the Second Respondent (Naledi Municipality) irrevocably and unconditionally consent to the borrower (Ninth Respondent) ceding all or any of its rights and/or delegating all or any of its obligations arising from the Development Rights Agreement to Nurcha Finance Company (Applicant).

[30] On behalf of the Ninth Respondent Mabaso and Mpempe by virtue of the aforementioned resolution, signed a power of attorney and a cession in favour of the Applicant. The cession therefore happened with the knowledge and blessings of the Second Respondent.

[31] In my view, the Ninth Respondent had completely and effectively divested itself of its right, title and interest in and to the contract income by virtue of the said cession.

[32] The Tenth Respondent supplied building material to the Ninth Respondent, who failed to pay for it. The Tenth Respondent obtained judgment by default. The First Respondent (Sheriff) attached an amount of R408 370-10 which is contract income and which was payable by the Second Respondent to Ninth Respondent. As a result of the valid cession, Ninth Respondent was no longer entitled to these monies and the right to these monies lies with the Applicant. The attachment of these monies as contract income is therefore invalid.

[33] It was contended on behalf of the Tenth Respondent that these contracts were concluded after the cession document was signed. There is however no legal prohibition against the cession of a right which is not yet in existence.

[34] In Muller NO v Trust Bank of Africa Ltd and Another 1981 (2) SA 117 (N) at 126 D-F the following is stated:-

“In the case of an existing right the obligatory agreement to cede and the real agreement whereby the cession is carried into effect and the cedent divested of the right and the cessionary vested with it, may coincide in point of time and become so assimilated as to be seemingly indistinguishable. I can see no objection to the parties’ entering into an agreement (the obligatory agreement) to cede a right of action not yet in existence but which may come into existence at some future date. It may even be that they may be able to agree in advance that the right, when it does come into existence, will pass to the cessionary without any further expression of intention. This would however not mean that the cessionary could be vested with the right before the right has come into existence.”

See also: Proash Credit Corporation CC v Melane 1997 (1) All SA 430 (E).

[b] Non-compliance with Rule 45(8) of the Uniform Rules of Court:

[35] Rule 45(8) of the Uniform Rules of Court provides as follows:-

“If incorporeal property whether movable or immovable is available for attachment it may be attached without the necessity of a prior application to court in the manner hereinafter provided:

…

In the case of all other incorporeal property or incorporeal rights in property as aforesaid,

the attachment shall only be complete when,

notice of the attachment has been given by the Sheriff to all interested parties and where the asset consists of Incorporeal immovable property or an incorporeal right in immovable property notice shall also have been given to the Registrar of Deeds in whose deeds registry the property or right is registered, and

the Sheriff shall have taken possession of the writing or document evidencing the ownership of such property or right or shall have certified that he has been unable despite diligent search to obtain possession of the writing or document.

The Sheriff shall upon exhibiting the original of the warrant of execution to the person having possession of property in which incorporeal rights enter upon the premises where such property is and make an inventory and valuation of the right attached.”

[36] The right attached constitutes a movable incorporeal thing. It is a prerequisite for attachment that such property must be “available for attachment”.

[37] It is contended on behalf of the Applicant that the property attached was not available for attachment seeing that no right to receive the money existed in favour of the Ninth Respondent after the cession. I am in full agreement with this contention. The right to the attached money is vested in the Applicant and not in the Ninth Respondent. Judgment was obtained against the Ninth Respondent and seeing that the Ninth Respondent had ceded its right to these monies in favour of the Applicant, there was nothing to attach. The attachment is therefore invalid, because the money is not available for attachment.

[38] Rule 45(8)(c)(i)(a) requires notice of the attachment to have been given by the Sheriff to all interested parties. The Applicant, as cessionary, is an interested party in these proceedings. It is contended on behalf of the Applicant, that the Sheriff (First Respondent) did not give any notice to it and that the attachment is therefore not complete.

[39] It is not disputed that no notice was given to the Applicant as an interested party. In my view, the attachment is incomplete and invalid.

[40] Rule 45(8)(c)(i)(b) provides that the attachment shall only be complete when the Sheriff shall have taken possession of the writing or document evidencing the ownership of such property or right, or shall have certified that he has been unable despite diligent search to obtain possession of the writing or document,

[41] It was contended on behalf of the Applicant that the First Respondent (Sheriff) has done neither. The writing or document upon which the Sheriff should have levied execution are the certificates of the engineer which constitutes liquid documents.

[42] The Applicant had issued two accounts to the Second Respondent for work done by the Ninth Respondent who had validly ceded all its rights to the Applicant. These accounts in the amount of R546 806-70 and R389 367-00 respectively, were certified by the engineers of the Second Respondent.

[43] The Second Respondent acknowledged its indebtedness in the certified amounts, which in my view is due to the Applicants because of the cession.

[44] The attachment in my view is invalid for the aforementioned reasons and must be set aside.

Conclusion:

In the premises, I make the following order:-

The attachment by the First Respondent on the 06th May 2005 of the monies in the amount of R408 370-10 under case number 1525/04 is invalid and of no force and effect.

The Second Respondent is ordered to make payment in the amount of R408 370-10 to the Applicant.

The Tenth Respondent is ordered to pay the costs of this Application.

R D HENDRICKS

JUDGE OF THE HIGH COURT

ATTORNEYS FOR THE APPLICANT: SMIT STANTON INC.