REPORTABLE
Case number: 558/98
IN THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
KELVIN PARK PROPERTIES CC
APPELLANT
and
A S PATERSON NO
RESPONDENT
CORAM:
SMALBERGER,
GROSSKOPF,
SCOTT
JJA,
FARLAM and MTHIYANE AJJA
DATE OF HEARING: 21 SEPTEMBER 2000
DELIVERY DATE:
29 SEPTEMBER 2000
Insolvency - s 34(1), Insolvency Act 24 of 1936 - whether insolvent “trader” as
envisaged by s 34 - whether property on which business conducted by insolvent
formed part of business.
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JUDGMENT
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MTHIYANE AJA
MTHIYANE AJA:
[1] One Schutte (“the insolvent”) operated a butchery business for a number of
years on his immovable property known as erf 3475, Stutterheim (“the property”)in
the Eastern Cape.  On 12 - 13 March 1994 a fire broke out on the premises and the
butchery was extensively damaged.  On 26 April 1994 the insolvent and the appellant
concluded two written agreements in terms of which the insolvent sold the property
and a substantial number of movable assets which were used in the butchery (“the
movables”) to the appellant for the sum of R175 000.  The tax invoice annexure “L”
issued by the insolvent to the appellant records the sale as the “Sale of business”.  The
transfer of the property into the name of the appellant was registered on 9 May 1994
and the movables were transferred to the appellant before 9 June 1994, when the
insolvent’s estate was provisionally sequestrated.  A final sequestration order followed

on 17 July 1994.
[2] At the time of the fire the building on the property housed a butchery, a dwelling
and a general dealer’s shop, the said portions occupying 45%, 45% and 10%
respectively of the total building area.  The dwelling was occupied by the insolvent’s
brother, who worked in the butchery, free of rent or as a fringe benefit.  The portion
from which the general dealer’s shop was operated was leased to a third party.
[3] At the time of the fire and as at the date of his sequestration, the insolvent owed
his trade creditors the sum of R470 000,00.
[4] The transfer of the property and the movables from the insolvent to the
appellant was not preceded by the publication of a notice in terms of s 34(1) of the
Insolvency Act 24 of 1936 (“the Act”).
[5] After taking transfer of the property and the movables, the appellant restored the

damaged butchery and proceeded to conduct a business on the premises as Amatola
Butchery.  The insolvent had previously operated as Model Butchery.  Accordingly,
the tax invoice annexure “L” records that it was issued by Model Butchery to Amatola
Butchery.
[6] The third party who had leased the general dealer’s shop from the insolvent
continued the lease with the appellant after the sale, and the insolvent’s brother
continued to be employed in the butchery until December 1994.  The appellant allowed
the insolvent’s brother to continue to occupy the dwelling over that period on the same
conditions as before.
[7] The respondent, the trustee of the insolvent estate, instituted action in the
Eastern Cape Division in which he sued the appellant for the return of the property and
the movables, failing which payment of their value in the sum of R175 000,00.  He
claimed that the property and the movables formed part of the insolvent’s business as

contemplated in s 34(1).  The respondent contended that because the insolvent was
a trader at the time of the sale and the property and the movables were not transferred
in the ordinary course of business, the insolvent should have caused a notice of their
intended transfer to be published and complied with the time periods provided for in
s 34(1), and that the insolvent’s failure to comply with the section rendered the
transactions void.
[8] The appellant admitted the insolvent’s failure to comply with the provisions of
s 34(1), but denied that the insolvent had been obliged to do so because (1) he was not
a trader as envisaged in the section, and (2) the property and the movables did not
form part of the insolvent’s business as contemplated in s 34(1).
[9] Leach J rejected this argument and found that the insolvent was, at the time of
the transfer, a trader as defined in s 2 and that the property and the movables formed
part of the business of the insolvent.  His judgment is reported: see 1998(2) SA 89 (E).

The learned judge granted the appellant leave to appeal to the Full Court but the appeal
failed.  The appellant now appeals to this Court with special leave.
[10] The issues for decision in this appeal are whether the insolvent was, at the time
of the transfer of the property and the movables a “trader” as defined in s 2 and, in the
event of that being established, whether the property formed part of the insolvent’s
business as contemplated in s 34(1).
[11] Section 34(1) reads as follows:
“If a trader transfers in terms of a contract any business belonging to
him, or the goodwill of such business, or any goods or property forming
part thereof (except in the ordinary course of that business or for
securing the payment of a debt), and such trader has not published a
notice of such intended transfer in the Gazette, and in two issues of an
Afrikaans and two issues of an English newspaper circulating in the
district in which that business is carried on, within a period not less than
thirty days and not more than sixty days before the date of such transfer,
the said transfer shall be void as against his creditors for a period of six
months after such transfer, and shall be void against the trustee of his
estate, if his estate is sequestrated at any time within the said period.”

[12] In terms of s 2:
“‘Trader’ means any person who carries on any trade, business, industry
or undertaking in which property is sold, or is bought, exchanged or
manufactured for purpose of sale or exchange . . . and any person shall
be deemed to be a trader for the purpose of this Act . . . unless it is
proved that he is not a trader as hereinbefore defined. . .”
[13] I propose to deal first with the issue of whether, at the time of the transfer of the
property and the movables, the insolvent was a trader as defined in s 2.  The appellant
argues that because the insolvent ceased his daily trading activities of buying and
selling meat, after the fire, he was no longer a trader when he sold  the property and
the movables to the appellant.  Counsel for the appellant submitted that the
legislature’s use of the present tense in the phrase “carries on business” in the
definition of “trader” was a strong indication that to fall within the definition in s 2 the
person concerned must at the time of the sale be engaged in the daily trading activities
of the business.

[14] I do not agree.  To give the word “carries” the limited present tense meaning of
someone actively engaged in the trade or business concerned, at the time of the
relevant transfer, would have the effect of depriving a creditor of the protection of s
34(1) in those cases where a trader simply closes his doors and then sells his business
or its assets.  That would defeat the manifest object of the legislation.
[15] The purpose which the legislature wished to achieve in enacting s 34(1) was to
prevent traders in financial difficulties from disposing of their businesses to third
parties who are not liable for the debts of the business, without due advertisement to
all their creditors, and, in so doing, from dissipating the purchase price or using the
purchase price to pay certain creditors regardless of the claims of others:  Harrismith
Board of Executors v Odendaal 1923 AD 530 at 538; Joosab v Ensor N.O. 1966(1)
SA 319 (A) at 324 H; Galaxie Melodies (Pty) Ltd v Dally N.O. 1975(4) SA 736 (A)
at 744 A - 745 A; Vermaak v Joubert & May 1990(3) SA 866 (A) at 872 H - J;

Silverstream Investments (Kranskop) CC v Ronbo Automotive CC 1997(1) SA 107
(D) at 111 C-E;  Bank of Lisbon International Ltd v Western Province Cellars Ltd
and Another 1998(3) SA 899 (W) at 901 E - 902 B.
[16] Counsel for the appellant criticised the decisions in the courts below and in the
Bank of Lisbon case (supra), to the extent that in those cases reliance was placed on
the English decisions which, he submitted, were based on the English bankruptcy laws.
The principle to be extracted from the cases in question is that trading or carrying on
of a business does not cease when ‘the shutters are put up’, but continues until sums
due are collected and debts paid: In re Dagnall, Ex parte Soan and Morley [1896]
2 QB 407 at 410 - 411 and Theophile v Solicitor-General [1950] 1 All ER 405 (HL).
In my view the criticism against seeking support from the English authorities is not
justified and ignores the fact that both English and South African legislation on the
point is aimed at the protection of creditors.  I cannot find fault with the approach

adopted by the courts below and in the Bank of Lisbon case (supra) with regard to
the English Law on the point.
[17] In casu the insolvent still had trade debts in the sum of R470 000,00 when the
sales were concluded and part of the purchase price was used to pay one of his
creditors.  In those circumstances, the approach adopted by the courts below to the
interpretation and application of s 34(1) read with ss 1 and 2 was that a person who
still had debts to discharge does not cease to be a trader merely because he has closed
his shop.
[18] I agree with that approach.  The onus of proving that the insolvent was not a
trader at the time of the sales rested upon the appellant:  Scott-Hayward N.O. v
Habibworths (Pty) Ltd 1959(1) SA 202 (T) at 203 E.  The respondent was assisted
in this regard by the deeming provision in the definition of “trader”.  In my view the
appellant failed to discharge the onus.  In the result the insolvent was, at the time of the

transfer, a trader as defined in s 2.
[19] That brings me to the issue of whether, at the time of its transfer, the property
formed part of the business of the insolvent as contemplated in s 34(1).  It is
unnecessary to consider whether the movables also formed part of the business.  At
the trial the appellant conceded that in the event of it being found that the insolvent was
a trader at the time of the transfer the respondent would be entitled to an order in
respect of the value of the movables.  The onus to prove that the property formed part
of the business of the insolvent rests on the respondent:  Joosab’s case (supra) at 324
E.  The consideration of this issue turns largely on the facts and upon inferences to be
drawn from them.  The difficulties in dealing with this aspect of the case stem largely
from the inadequacies in the common cause facts agreed upon by the parties in the
form of a stated case.  They are lacking in clarity and detail and it is difficult to draw
proper inferences from the limited factual data provided by the parties.  A little more

clarity would have made our task easier.
[20] Counsel for the appellant argued that the property did not form part of the
insolvent’s butchery business  but was merely a place where the business was
conducted.  He further argued that a clear distinction should be drawn between goods
which form part of the business of a trader and those which form part of the assets of
the person concerned.  He contended that the Courts below failed to make this
distinction.  Counsel sought support for his contention from the decision in Bruyns
N.O. v Aerogrande (Pty) Ltd 1964(3) SA 554 (W) in which it was held that although
an aircraft (in issue in that case) was an asset of the insolvent (company) it was not
necessarily property forming part of its business.
[21] The decision in the Bruyns case (supra) does not assist.  The case is
distinguishable on the facts in that it dealt with an exception to the plaintiff’s
declaration in which the plaintiff had failed to allege that the aircraft in question formed

part of the goods of the trader’s business.
[22] Counsel for the respondent argued that the portion of the building used as a
butchery and the portion used for accommodating an employee of the butchery
formed an integral part of the business.  These portions of the building on the property
were used for no other purpose.  We were urged to view the matter on the following
basis: the more indispensable an asset is to the business and the less it is used for
some purpose unconnected with the business, the greater the argument to be made for
its forming part of the assets of the business within the meaning of s 34(1). There is
much to be said for this contention.
[23] It is however not too difficult to imagine hardships that could result from
formulating the test as to the meaning of the words “forming part of” in s 34(1) too
broadly.  Nowadays it is not uncommon for traders to conduct business from their
homes.  While one may be  tempted to formulate an all-encompassing test, I believe

that the proper approach when interpreting and applying the provisions of s 34(1)
would be to consider each matter in the  light of its particular facts.
[24] In casu the insolvent was the owner of the property on which the butchery
business was conducted.  The part of the building in which the butchery was situated
was adapted for that purpose and the dwelling was occupied by an employee.  It was
not used for any other purpose.
[25] The facts in the stated case do not indicate how the property was treated in the
books of account of the business.  When the matter was debated during argument in
this Court, counsel for the appellant endeavoured to suggest that there was some
notional precarious tenancy between the business and the insolvent, in terms of which
the business was allowed to occupy the property.  However this was not the case
made out by the appellant in the papers and in the stated case.  I am therefore not
disposed to deal with the matter on that basis.

[26] In my view, there is an overwhelming probability that, at the time of the transfer,
the property formed part of the insolvent’s business as contemplated in s 34(1).  The
salient features which point in that direction are the following:
(a)
The portion of the building in which the butchery was situated was
specifically adapted for that purpose and included a walk-in cold
room and the electrical equipment required to operate it.
(b)
The dwelling portion of the building was used for the sole purpose
of accommodating an employee of the butchery.  Although in the
stated case it is said that the insolvent’s brother occupied the
dwelling either as a fringe benefit or rent free, it is more likely that
it was occupied as a fringe benefit - a situation which continued
after the appellant acquired the property.
(c)
Although two separate agreements of sale were concluded in
respect of the property and the movables, the invoice, annexure
“L”, which was issued by the insolvent to the appellant on 25 April
1995 pursuant to the sale, refers to the sale as the “Sale of
business”.  This suggests that the insolvent treated the property as
part of his business.  It is unlikely that he would have done so if
this was not in fact the case.
(d)
In each of the agreements of sale in respect of the property and the
movables there is a clause providing that the “sale is subject to
Value-Added Tax in terms of section 8(7) of the Value-Added Tax

Act” (Act 89 of 1991 - “the VAT Act”).  That section provides
for the “disposal of an enterprise as a going concern or a part
thereof which is capable of separation, . . . which shall for the
purposes of this Act be deemed to be a supply of goods made in
the course or furtherance of such enterprise.  In my view there
would have been no reason for the parties to have agreed to s 8(7)
of the VAT Act being made applicable to the sale of the property
if they did not regard the property as part of the insolvent’s
business.

[27] Despite the difficulties occasioned by the inadequacies in the stated case, there
are, as I have indicated, a number of cardinal considerations which justify the
conclusion that the respondent has discharged the onus resting on him of establishing
that the property formed part of the business of the insolvent when it was sold to the
appellant.  90% of the total area of the building formed part of the butchery business
and only a negligible portion of the building (10%) was used for another purpose.  As
the portion that was leased to the third party cannot be separated from the remainder
of the property, the whole of the sale of the property had to be set aside for non-

compliance with s 34(1).  In my view the appellant fails on both issues.
[29] The appeal is accordingly dismissed with costs.
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K K MTHIYANE
ACTING JUDGE OF APPEAL
SMALBERGER JA )Concur
GROSSKOPF JA    )
SCOTT JA
)
FARLAM AJA
)