THE SUPREME COURT OF APPEAL
OF SOUTH AFRICA

CASE NUMBER 474/97

In the matter between:

COOPER, BRIAN ST CLAIR
First Appellant
JANSE VAN RENSBURG, JACOBUS HENDRIKUS
Second Appellant

and

MERCHANT TRADE FINANCE LIMITED
Respondent

CORAM: OLIVIER, ZULMAN JJA;  FARLAM, MADLANGA and
MPATI AJJA

DATE OF HEARING:
16 SEPTEMBER 1999

DATE OF JUDGMENT:
1 DECEMBER 1999

Liquidation of close corporation - handing over of movables by a debtor to a
creditor one day before the filing of an application to liquidate a close
corporation in fulfilment of an  obligation in terms of a notarial general
mortgage bond - intention to prefer one creditor above others and ordinary
course of business.

JUDGMENT

ZULMAN JA:
[1]     I have had the advantage of  reading the judgment of my brother Olivier JA.
I am regrettably unable to agree with his conclusion that this appeal should be

upheld.

[2]     In my view the respondent has discharged the onus of proof resting upon it of
showing that Cat Quip CC (Cat Quip) did not intend to prefer the respondent above
its other creditors.  The following are my reasons for this view:-

[3]     At the outset it may be convenient to set out the following, mostly well-
known general principles, applicable to the concept of Aan intention to prefer@ in
section 29(1) of the Insolvency Act, 24 of 1936 (Athe Insolvency Act@).1

[4]  It is essential and indeed fundamental to any decision as to whether there has
been an intention to prefer to examine and weigh up  all of the relevant facts which
prevailed at the time that the disposition was made in order to determine what, on a
balance of probabilities, was the Adominant, operative or effectual intention in
substance and in truth@2 of the debtor for making the disposition.

See for example, E.M. de la Rey, Mars/The Law of Insolvency 8th ed
(1988) para 12.20 pp 221-227; Catherine Smith The Law of
Insolvency 3rd ed (1988) pp 132-136; Meskin Insolvency Law (para
5.31.6.4 pp 5-109 to 5-112); and The Law of South Africa (First
Reissue) (Vol 11) para 186 pp 174-177)
Pretorius= Trustee v Van Blommenstein, 1949(1) SA 267 (O) at 279.
See also Swanepoel, N.O. v National Bank of South Africa 1923 OPD
35 at 39; Pretorius N.O. v Stock Owners Co-Operative Co. Ltd
1959(4) SA 462 (A) at 476 - 477; Giddy, Giddy & White=s Estate v

Du Plessis 1938 EDL 73 at 79 - 80; Eliasov N.O. v Arenel (Pvt) Ltd
1979(3) SA 415 (R) at 418 G-H; Venter v Volkskas Ltd 1973(3) SA
175(T) and Van Zyl & Others N.N.O. v Turner & Another NNO
1998(2) SA 236 (C) at 244 para 30

[5]  In seeking to establish whether the requisite intention was present in the
debtor=s mind at the time of making the disposition the test is a subjective one.
The court is required to determine a question of fact.  As Lord Greene, M. R.,
echoing the well-known language of Bowen LJ in an earlier case, asserted:-

AA state of mind is as much a fact as a state of digestion, and the
method of ascertaining it is by evidence and inference ......@3

In re  M. Kushler, Limited. [1943] Ch.  248 at 252 and Edgington v
Fitzmaurice (1885) 29 Ch. 459 at 483, per Bowen, L.J (not an
insolvency case).  See also Ian F.  Fletcher The Law of Insolvency
(Second ed) (1996)  227-229

[6]  The mere fact that the effect of the transaction is to prefer one creditor above
another does not necessarily mean that there has been a voidable preference.
Obviously in every case where one creditor is paid and others are  not there is a
preference in favour of the creditor who has  been paid.  Something additional is
required to impeach the transaction.  That additional requirement is an intention to
prefer on the part of the debtor.  The position is different in Australia where, for
example, in terms of the relevant legislation the courts of that country are only
concerned with the effect of the transaction and not the motive of the debtor.4
Similarly the American Bankruptcy Code of 1978 requires no proof of intention
but embraces an objective theory of preferences.5  On the other hand the now
repealed Section 44 of the English Bankruptcy Act of 1914 as also Section 239 of
the current English Insolvency Act of 1986 require a subjective intention to be
established, albeit that it is  the trustee or liquidator seeking to set aside a
preference, who bears the onus of proof of showing an intention to prefer on the
part of the debtor.6

See for example Ferrier v Civil Aviation Authority (1995) 127 ALR
472 (The Full Court of the Federal Court) at 485-487.  See also A
Boraine & A Keay  - Challenging Pre-bankruptcy Dispositions.  An
Australian - South African Comparison (1998) SA Merc LJ 267 at
280 - 285.
See Section 547 of the Bankruptcy Code of 1978 (USA)
As to Section 44 of the 1914 Act see for example Peat v Gresham
Trust Ltd [1934] AC 252.  As to Section 239 of the 1986 Act see Re

M Bacon Ltd [1990] BLCL324

[7]   It is not incumbent upon the party who bears the onus of proving an absence
of an intention to prefer to eliminate by evidence all possible reasons for the
making of the disposition other than an intention to prefer.  This is so because the
court, in drawing inferences from the proved facts, acts on a preponderance of
probability7.  The inference of an intention to  prefer is one which is, on a balance
of probabilities, the most probable, although not necessarily the only inference to
be drawn.  In a criminal case, one of the Atwo cardinal rules of logic@ referred to by
Watermeyer JA in R v Blom8  is that the proved facts should be such that they
exclude every reasonable inference from them save the one to be drawn.  If they do
not exclude other reasonable inferences then there must be a doubt whether the
inference sought to be drawn is correct.  This rule is not applicable in a civil case.
If the facts permit of more  than one inference, the court must select the most
Aplausible@ or probable inference.  If this favours the litigant on whom the onus
rests he is entitled to judgment.  If on the other hand  an inference in favour of both
parties is equally possible, the litigant will have not discharged the onus of proof.
Viljoen JA put the matter as follows in AA Onderlinge Assuransie-Assosiasie
Beperk v De Beer9:-

cf Elgin Fireclays Limited v Webb 1947(4) SA 744(A) at 750
1939 AD 188 at 202

1982(2) SA 603 (A) at 614 E-H

ADit is, na my oordeel, nie nodig dat >n eiser wat hom op
omstandigheidsgetuienis in >n siviele saak beroep, moet bewys dat die
afleiding wat hy die Hof vra om te maak die enigste redelike afleiding
moet wees nie.  Hy sal die bewyslas wat op hom rus kwyt indien hy
die Hof kan oortuig dat die afleiding wat hy voorstaan die mees voor-
die-hand liggende en aanvaarbare afleiding is van >n aantal moontlike
afleidings.@
Selke J expressed the matter in Govan v Skidmore10 thus:-

1952(1) SA 732(N) at 734 C-E.  Approved of, for example,  in South
British Insurance Company Limited v Unicorn Shipping Blinds (Pty)
Limited 1976(1) SA 708 (A) at 713  E-G and Smit v Arthur 1976(3)
SA (A) 378 at 386 B-D
A...... in finding facts or making inferences in a civil case, it seems to
me that one may, as Wigmore conveys in his work on Evidence, (3rd
ed.  para 32), by balancing probabilities select a conclusion which
seems to be the more natural, or plausible, conclusion from amongst
several conceivable ones, even though that conclusion be not the only
reasonable one.@

Holmes JA in Ocean Accident and Guarantee Corporation Limited v Koch11
explained that he understood Aplausible@, in the context of the remarks of
Selke J, to  mean Aacceptable, credible, suitable@.

1963(4) SA 147 (A) at 159 C-D

[8]  The mere fact that the person who made the disposition does not give evidence
does not ipso facto mean that one must infer that there was an intention to prefer.
So for example in Gert de Jager (Edms) Bpk v Jones, N.O. en McHardy, N.O.12 the
debtor did not give evidence.  This notwithstanding, Rumpff, JA nevertheless, after
remarking that it was the debtor who knew best as to what his intention was in
regard to the disposition, still examined the probabilities in order to determine
whether the inference of an intention to prefer was justified in the particular
circumstances of the case.  Indeed as Catherine  Smith points out13 a debtor who
has made a disposition to a creditor with the intention of preferring him above his
other creditors is hardly likely to testify that he had that intention.  In this regard
the following observation of De Villiers JP, made as long ago as 1923, in
Swanepoel v National Bank of South Africa14 is particularly apposite, even today:-
AThen, again, it is true that the insolvent in his evidence repeated the
formula that when he passed the bond he was still >hoping to tide over
his difficulties=.  Well, if I may be permitted to mention a matter of
personal experience, during the last 20 years I have not known of a
single undue preference case in which the insolvent, on being called
as a witness, has failed to repeat that formula or its equivalent in
Afrikaans.@

[9] Preference predicates an act of free will.  As observed by Pennycuick J in In

1964(3) SA 325(A) at 331 H
The Law of Insolvency (supra note 1) p 134
supra note 2 at 37

re F.L.E. Holdings Ltd.15:-
AIt does not follow because there is no pressure or
consideration, that the dominant intention is to prefer the  other
party. Pressure and consideration may be conclusive that there
is not a dominant intention, but the converse is not so.

One has to take all the circumstances into account, and
consider what is the correct inference to draw.@16

[1967]  1  W.L. R 1409 at 1420
See also Farrar, AThe Bankruptcy of the Law of Fraudulent
Preference@ The Journal of Business Law (1983) pp 398-399 and
Pretorius= Trustee v Van Blommenstein (supra note 2 at 279)

[10] In order to determine whether the debtor had the  requisite intention it is
necessary to enquire whether the debtor actually applied his mind to the matter.  If
there was no application of mind by the debtor to the question of whether in fact he
was conferring a preference, it can hardly be said that he had an intention to do so.
There is no room for treating as an intention to prefer Aa culpable or reckless
disregard of the possibility that the disposition might have the effect of preferring
one creditor above another.@ 17  An actual intention is required - not simply the fact
that objectively viewed the debtor ought to have realised that a preference would
occur if the disposition is made.   Due regard being had to he party who bears the
onus in English law, the matter is well put by Tomlin LJ in Peat v Gresham Trust
Limited 18 in these words:-
AIt is contended on the appellant=s behalf that once given the
withdrawal and the consequences of the withdrawal, then in the
absence of any other explanation the intent to prefer must be inferred,
because a man is presumed to intend the natural consequences of his
act.   My Lords, I do not accept this contention.  In my opinion in
these cases the onus is on those who claim to avoid the transaction to
establish what the debtor really intended, and that the real intention
was to prefer.  The onus is only discharged when the court upon a
review of all the circumstances is satisfied that the dominant intent to
prefer was present.  That may be a matter of direct evidence or of
inference, but where there is not direct evidence and there is room for
more than one explanation it is not enough to say there being no

See Michalow, N.O. v Premier Milling Company Ltd 1960(2) SA 59
(W) at 65 C-D; Michau=s Trustees v De Wet 1909  EDC 44; Slater=s
Trustee v J O Smith and Co (1885) 5 EDC 9 at 21
Supra note 6 at 262

direct evidence the intent to prefer must be inferred.@

The position might well be otherwise in a criminal case involving, for
example, a contravention of section 135(1)
of the Insolvency Act relating to a debtor
knowingly giving an undue preference
shortly before the rehabilitation of  his
estate.19

cf. R v Ismail 1920 AD 316 referred to by Horwitz J in Pretorius=
Trustee v Van Blommenstein (supra note 2 at 279) which was
concerned principally with the equivalent section in the 1916
Insolvency Act (section 139(3)) not Section 27 of that Act, which is
equivalent to section 29(1) of the 1936 Insolvency Act)

[11]  Mere proof that the insolvent=s liabilities exceeded his assets at the time the
disposition was made does not raise a presumption of an intention that the debtor=s
dominant motive in making the disposition was to prefer.  Whilst contemplation of
insolvency or inevitable insolvency is generally speaking  necessary before an
intention to prefer can be inferred it by no means follows axiomatically that the
presence of such a state of mind, in itself, proves such an intention since other
factors may nevertheless negate such an inference.20   Even if it can be said that
sequestration was substantially inevitable, evidence of a more probable inference to
the contrary that shows for example that the debtor=s dominant intention in making
the disposition was not to prefer the creditor in question but to achieve some other
purpose would not entitle the court to draw the inference of an intention to prefer.
As Pitman AJP pointed out in Giddys= case21:-
AThe intention to prefer must reside in the mind of the debtor, and its
presence here is ordinarily to be inferred from his conduct.  If, when
he is contemplating sequestration, he selects for payment out of a
number of creditors one, who has no right to such selection, the
inference from his conduct seems a fair one, that he intended to prefer
such creditor above the rest, to disturb in his favour the proper
distribution of his assets in insolvency.  Such is the only apparent
explanation of his action.  Where, however, behind the selection and

Pretorius N.O. v Stock Owners Co-operative Co. Ltd ( supra note 2)
at 477 A;  Du Plooy=s Trustee v Plewman 7 SC 332 and Giddy, Giddy
and White=s Estate v du Plessis (supra note 2);  S v Ostilly & Others
(1) 1977 (4) SA 699 (D  CLD) 699 at 731 G-H; Gert de Jager (Edms)
Bpk v Jones N.O. en McHardy N.O. (supra note 12 at 332) A-B
Supra note 2 at 79

payment there appears to be some other compelling intention, the
intention to prefer is not necessarily to be regarded as the dominant
intention.  The former intention indeed may so powerfully animate
the debtor, that the intention to prefer may be said to have been
wholly inactive.@

[12] In accordance with general principles if an inference of an innocent motive as
opposed to an improper one can be drawn this should be done.22

cf. Trustees of Payn=s Insolvent Estate v Bank of Africa Limited
(1885) NLR 231 at 234; Trustee Insolvent Estate H.A.P. Lyle v
Musson, Denby and Greene 25 NLR 315; R v Sircoulomb 1954(4) SA
237 (SWA) at 240 G
[13] The question which the court has to decide is not whether the debtor should
have known that the effect of the disposition made would have been to disturb the
proper distribution of his assets but rather as  a fact that he intended it to have that
effect.  As previously stated if the debtor never applied his mind to the matter it
again can hardly be said that he had the requisite intention.

[14 ]  Any relationship between the insolvent and the creditor in addition to that of
debtor and creditor, for example where the creditor is a close family member or
relative, is relevant to the existence or non-existence of an intention to prefer.23

[15] An intention to prefer involves the requirement that the debtor must, at the
time of the disposition, have been in a position to exercise a free choice.  It
accordingly follows that where the insolvent=s primary or dominant motive was for
example, to shield himself from a criminal prosecution or to cover up a mis-
appropriation of assets then it cannot be said that  the disposition was made with
the intention to prefer the recipient.24   In Sharp (Official Receiver) v Jackson and

Pretorius= Trustee v  Van Blommenstein  (supra note 2 at 279 - 280)
and Eliasov=s case (supra note 2 at 418-419)
Van Zyl=s case (supra note 2) para 30

Others25 Lord Macnaghten described the position of the person there making the
disposition as Abeing under an overwhelming sense of imminent peril@.

1899 AC 419 at 427

[16] A useful summary of most of the above matters, even although the question of
intention in section 30(1) where the onus of proof is upon the trustee, and not
section 29(1) of the Insolvency Act was being considered,  is contained in the
following remarks of Boshoff J in Venter v Volkskas Ltd26:-
AWhether a disposition was made with the intention of preferring one
creditor above another within the meaning of sec 30(1), is in each
case a question of fact which can be established either with direct
evidence or by inference from the circumstances in which the
disposition was made.  Being a question of intention, it involves a
subjective assessment of the debtor=s action in having made the
disposition.  In the absence of direct evidence of an intention to prefer
one creditor above another, it must generally speaking be proved that
the debtor contemplated sequestration before an inference can be
drawn that he made the disposition with the intention to prefer the
creditor, to whom the disposition was made, above another;   see
Pretorius, NO v Stock Owners= Co-operative Co. Ltd,. supra at pp 471
to 472 and 476; Gert de Jager (Edms) Bpk v Jones, NO, en McHardy,
NO, 1964(3) SA 325 (A.D.) at p 331.   It is not sufficient that the
circumstances show that the debtor should have realised that the
effect of the disposition would be to disturb the proper distribution of
his assets in the event of the sequestration of his estate.  They must
show that he as a fact intended it to have that effect.  This is so
because the onus is on the person who claims to avoid the disposition
to establish what the debtor really intended (what the object in his
mind was) and that his real intention (or real object in his mind) was
to prefer the creditor to whom the disposition was made above the
other creditors.  It is conceivable that a debtor may also have had
other objects in mind when he made the disposition but in that event it
is incumbent upon the person upon whom the onus lies to establish
that to prefer the creditor in question was the paramount, dominant or
substantial object.  A preference involves a free selection.  Where
therefore a debtor pays a creditor >out of his turn= under great pressure

(Supra note 2  at 180 E to 181 B)

or to avoid a prosecution or for some other reason that negatives the
inference that the main object was to prefer the creditor, intention to
prefer will not be proved.@

[17]     I turn now to consider the relevant facts in this case with reference to the
principles which I have set out above.  The facts appear clearly from the
comprehensive  judgment of my brother Olivier JA.   In summary they are as
follows:-

(1)
On 4 April 1990 Cat Quip caused a notarial general mortgage bond
(Athe bond@) to be registered over all its movable property in favour of
the respondent.

(2)
On 18 November 1992 Cat Quip defaulted in meeting certain bills of
exchange which it had drawn in favour of the respondent.

(3)
On 20 November 1992 Mr Weichelt, Cat Quip=s sole member died.

(4)
On 26 January 1993, Mr Rivkind, who was employed by the
respondent and who dealt with Cat Quip=s account, obtained
possession of all Cat Quip=s movable assets from Mrs Weichelt (Mr
Weichelt=s widow) who then managed Cat Quip=s affairs and handed

him two sets of keys to Cat Quip=s premises.

(5)
On 27 January 1993 the respondent obtained an order of court
purporting to authorise it to perfect its security by taking possession
of all of Cat Quip=s movable property.

(6)
Also on 27 January 1993 Mr Tom Weichelt (Mrs Weichelt=s brother-
in-law) filed an urgent application in the same court for the
provisional liquidation of Cat Quip.  The application did not proceed
on that day.

(It is not possible to establish from the papers nor was this Court informed
whether the order  which the respondent obtained on 27 January 1993 to
perfect its security was made before or after the filing of Mr Tom Weichelt=s
application.)

(7)
On 2 February 1993 Cat Quip was placed under provisional
liquidation at the instance of Mr Tom Weichelt.

[18]  In my opinion if one examines and weighs up the totality of circumstances
which gave rise to the disposition, the proper inference to be drawn  is that the

respondent established, on a balance of probabilities, that Mrs Weichelt=s
Adominant or operative or effective intention in substance and in truth@ when she
handed over the keys to Mr Rivkind, was not to prefer the respondent,  within the
meaning of that phrase in Section 29(1) of the Insolvency Act, but rather to comply
with the clear obligations imposed upon Cat Quip in terms of Clause 7.1.2. of the
bond.  (The bond, it will be recalled, was executed some three years previously on
4 April 1990.)  To my mind the following are the essential facts which render this
the most Aplausible@ inference:-

[19] It was Mrs Weichelt who first raised the question of the existence of the bond
in the discussion which she had with Mr Rivkind immediately prior to her handing
over the keys.  This fact indicates that the existence of the bond was uppermost in
her mind.  To paraphrase Pitman AJP=s phrase in Giddys= case, this shows that  the
existence of the obligation under the bond so powerfully Aanimated@ Mrs Weichelt
as to render any intention to prefer Awholly inactive@.27  It is fair to infer from the
aforegoing  that the more Aplausible or acceptable or credible or suitable reason@
for her handing over the keys was, I repeat, her intention to comply, on behalf of
Cat Quip, with Cat Quip=s clear obligations.  It was not to seek to prefer the

See para 3.8 and notes 2 and 21 above

respondent, although the latter was the effect of the disposition.

[20] The fact that neither Mr Rivkind nor Mrs Weichelt ever discussed or even
raised what the effect of handing over the keys would be upon Cat Quip=s other
creditors indicates to me  that Mrs Weichelt, as a matter of probability, was not
concerned with conferring any preference on the respondent as her dominant
motive in making the disposition.

[21]  There is no suggestion whatever that the bond registered almost three years
previously was not a genuine or open transaction.  Nor is there any suggestion that
at the time the bond was registered and the disposition contained therein made that
liquidation of Cat Quip was pending or even contemplated.

[22] The parties represented by Mr Rivkind and Mrs Weichelt conducted
themselves at arms length.  There was no relationship between them other than of
debtor and creditor.

[23] In the particular circumstances of this case the pressure which was  present to
Mrs Weichelt=s mind was that Cat Quip had no defence to the right which the
respondent was seeking to exercise to take possession of Cat Quip=s movable
assets.  It would not have  been  competent  in law, for Mrs Weichelt to have told

Mr Rivkind, even if she had applied her mind to the matter, that she was not
prepared to hand over the keys, because based upon a debt which she in any event
considered was not owing to her late husband=s brother, a liquidation, was in the
offing.  The respondent would have been perfectly entitled, had she refused to hand
over the keys, to immediately approach a court and seek an appropriate order.  Cat
Quip=s liability was undisputed in that it  had not honoured bills which it had given
to the respondent for moneys advanced to it by the respondent.  The respondent
accordingly had every right to act in terms of the bond.28

[24] The following exchange between Counsel for the appellants and  Mr  Rivkind
sheds some limited light upon what might well have been Mrs Weichelt=s true
intention when she handed over the keys:-
AIsn=t it a case sir that you never took possession at all, that Mrs Weichelt=s
motive in giving you the key had nothing to do with perfecting a pledge, it
was simply a case of her employees over the last weekend had been pinching
some stock, she was a widow she could not control it and she asked you
please won=t you on her behalf just take control of it until the liquidation
order to preserve everything until the liquidation comes through? C That
was not the case.@

Presumably Counsel put the question upon the basis of information that the
appellants as the liquidators of Cat Quip obtained from Mrs Weichelt.

See for example Pietersburg Cold Storage, Ltd  v Cacaburas  1925
TPD 295 and International Shipping Co (Pty) Ltd v Affinity (Pty) Ltd
and Another 1983(1) SA 79(C) at 84 C-H

[25]   Whilst it may be true that in all probability Mrs Weichelt must have
considered that the liquidation of Cat Quip was inevitable, I believe that a proper
evaluation of the totality of circumstances relating to the matter negates an
intention on her part to prefer the respondent.  Amongst the most important of
these circumstances are those that I have enumerated in paragraphs 19 to 24  above.

[26]   The mere fact that Mrs Weichelt did not give evidence and state that she had
no intention to prefer the respondent above other creditors is not of itself sufficient
reason to reject what  is,  as I have stated above, the most plausible and acceptable
reason for the disposition.  This reason emerges  from the uncontradicted and
credible evidence of Mr Rivkind and the factors to which I have drawn attention.  I
do not believe that anything of consequence  would have been added to the matter
had Mrs Weichelt stated in so many words that  by making the disposition she did
not intend  to prefer the respondent.   Such a statement would have amounted
merely to an ipse dixit. To paraphrase the words of Rumpff JA in Gert de Jager
Edms Bpk v Jones NO en  McHardy NO29 an inference that only she could have

Supra note 12  at 331 C (ASo >n afleiding [voorkeur aan een skuldeiser
bo >n ander] verloor sy krag indien daar getuienis is dat >n
vervreemding, gedoen in die omstandighede hierbo genoem,
inderdaad nie gepaard gegaan het met die oogmerk om die skuldeiser
voorkeur te verleen, nie@)

stated what her true intention was loses its force if one has proper regard to Mr
Rivkind=s evidence and to the circumstances prevailing at the time.  To repeat,  the
more Anatural, or  plausible@, explanation for the disposition, to use the words of
Selke J in Govan v Skidmore,30 was to comply with the obligations of Cat Quip of
which Mrs Weichelt was fully aware  at the time and not simply to prefer the
respondent above other creditors.

[27] Applying the test laid down by Ramsbottom JA in Pretorius NO v Stock
Owners Co-Operative Company Limited,31 even if one ignores what I have stated
in paragraph 24 above,  the correct inference to be drawn from the undisputed
evidence of Mr Rivkind is that there was indeed another compelling  reason for
making the disposition other than an intention on the part of Mrs Weichelt to prefer
the respondent.  That reason, to repeat yet again what I have previously stated, was
to comply with Cat Quip=s obligations in terms of the bond which it had executed

Supra note 10 at 734 C-D
Supra note 2  at 476 F-G

some years previously.

[28]     My brother Olivier JA was only prepared to assume, without deciding the
matter, that the respondent had discharged the onus of showing that the disposition
was made in Athe ordinary course of business@ within the meaning of Section 29 (1)
of the Insolvency Act.  He no doubt made this assumption because of his view that
the respondent had not discharged the onus resting upon it of showing that there
was no intention to prefer.  In my view the undisputed facts reveal that the
respondent also discharged the onus resting upon it of showing that the disposition
was made in the ordinary course of business.

[29]     The phrase Aordinary course of business@ although not defined in the
Insolvency Act has been interpreted on a number of occasions by our courts32 The
test, in contra distinction to the test as to whether an intention to prefer exists, is an
objective and not subjective one.  The matter needs to be determined with reference
to all the relevant circumstances in each particular case.  The best formulation of
the test, in my view, is that of De Villiers JP in Malherbe=s case33 where the

See for example Malherbe=s Trustee v Dinner and Others 1922 OPD
18 at 22, Hendricks N.O. v Swanepoel v Swanepoel 1962(4) SA 338
(A) at 345 B-E and Van Zyl & Others N.N.O. v Turner & Another
N.N.O. supra note 2 at 245  paras 33-39
Supra note 32 at 22

learned judge put the matter succintly as follows:-
A...... whether the disposition is in accordance with ordinary business
methods and principles obtaining amongst solvent men of business; that is to
say a disposition, in order to be in the ordinary course of business, must be
one which would not to the ordinary man of business appear anomalous or
un-businesslike or surprising.@

[30]     If one considers all the relevant facts of this matter in the light of  this test
there was nothing Aanomalous or un-businesslike or surprising@ when Mrs Weichelt
handed over the keys of the business of Cat Quip to Mr Rivkind on 26 January
1993.  The contention of the appellant to the effect that a solvent businessman
would not, in the ordinary course of business, hand over to a creditor the keys of
his business premises giving control of his stock in trade, overlooks the particular
circumstances which prevailed at the time that the keys were handed over.    Mrs
Weichelt had no choice in the matter.  Cat Quip was legally obliged in terms of
clause 7.1.2 of the  bond to comply with Mr Rivkind=s request.  The position is well
illustrated in the following remarks of De Villiers AJA in Jacobson and Co.
Trustees, v Jacobson and Co.34
ANow before a court would be entitled to say that the disposition was in the
ordinary course of business it would have to be satisfied that it is in
possession of all the facts, for only then would it be in a position to decide
whether the contracts themselves, which form the basis of the transaction are
genuine;   since a delivery that rests on a contract which itself is open to
question cannot be said to be a delivery in the ordinary course of business.@

1920 AD 75 at 79

In the instant case the contract in question was before the court and as already
pointed out there is no suggestion
that the contract was not a genuine
one not entitling the respondent to
act as it did.35

See for example Pietersburg Cold Storage Limited (Supra note 31)
[31]     In my view the entire matter is correctly summarised in the following
passage in the concluding portion of the judgment of the court a quo:-

AThis was not a disposition by Cat Quip with the intention of preferring
plaintiff above other creditors.  Ms Weichelt, on behalf of Cat Quip, merely
acquiesced to plaintiff exercising rights which she admitted.  Nor does
Section 29 find application.  There was no motive to give the plaintiff undue
preference, although this has, on the facts, resulted.  Perfecting a pledge in
this manner has in the past been recognised by our courts even in
circumstances such as the present.  It must therefore be regarded as a
transaction which was done in the ordinary course of business.  To hold
otherwise would practically wipe this legal notion from our law.  Were a
creditor in plaintiff=s position obliged to perfect his pledge when the debtor
is still solvent, it would have the effect of putting the debtor out of business
and inevitably result in his insolvency.  The general notarial bond over
moveable assets was devised to avoid exactly that.@

[32]   In the result I make the following order:-

(1)
The appellants= late filing of their power of attorney is condoned
subject to the appellants= paying the respondent=s costs occasioned by
the application for condonation.

(2)
The appeal is dismissed with costs.

___________________
R H ZULMAN JA

MADLANGA AJA
)
MPATI AJA

)CONCUR

OLIVIER JA

[1] The Appellants are the joint liquidators of Cat Quip CC (in
liquidation) which was provisionally wound up on 2 February 1993.   The
application for the liquidation of Cat Quip CC was presented to the then Supreme

Court of South Africa (Transvaal Provincial Division) on 27 January 1993.   In
terms of section 348 of the Companies Act the winding up is deemed to have
commenced on the latter date.

[2] The Respondent is a finance company.   At the date of its liquidation Cat
Quip was indebted to the Respondent in the sum of R453 648,07.

[3] It is common cause that the Second and Final Liquidation and
Distribution Account of Cat Quip, prepared by the Appellants, reflects total
liabilities of R2,4 million, owed to 24 concurrent, preferent and secured creditors.

[4] The crux of the dispute between the Appellants and the Respondent
involves the question whether the Respondent is merely a preferent creditor of
Cat Quip in liquidation (as alleged by the Appellants) or whether it is a secured
creditor (as alleged by the Respondent).

[5] In the court a quo Spoelstra J held that the Respondent is a
secured creditor.   The Appellants successfully applied to the learned judge for
leave to appeal to this Court.

[6] It is common cause that on 4 April 1990 Cat Quip CC (ACat Quip@)
caused a notarial general covering bond to be registered over all its movable
assets in favour of the Respondent as security for moneys lent and advanced.
By virtue of the law as it then stood the Respondent became a preferent, and not
a secured, creditor.

[7] The bond provides that it would be executable against the said movables
if Cat Quip breached any of its terms or committed an act of insolvency.   In such
an event, the bond provides inter alia :

7.1
If this bond becomes executable under clause 9, the

CREDITOR shall be entitled (but not obliged),
without notice to the MORTGAGOR and without first
obtaining any order or judgment -

7.1.1 to claim and recover from the
MORTGAGOR forthwith all and any
sums for the time being secured by
this bond, whether then due for
payment or not;  and/or

7.1.2 for the purpose of perfecting its
security hereunder to enter upon the
premises of the MORTGAGOR or any
other place where any of its assets are
situated, and to take possession of its
assets;  and/or

7.2
The CREDITOR is hereby empowered irrevocably
and in rem suam, with power of substitution and
delegation to exercise all or any of its rights,
authorities and powers in terms of this bond, and the
bond for this purpose shall be deemed to be an
irrevocable power of attorney by the MORTGAGOR
in favour of the CREDITOR.

[8] It is also common cause that by November 1992 Cat Quip was
experiencing cash flow problems.   In fact, on 18 November 1992 it defaulted in
meeting bills of exchange drawn in favour of the Respondent in the amount of
R121 430,38.

[9] At that stage Cat Quip was managed by Mr Weichelt, its sole member,
and assisted by his wife, Mrs Sandra Weichelt, who was employed at the
business as its bookkeeper/accountant.   Mr Rivkind was the account executive
employed by the Respondent who dealt with Cat Quip=s account.

[10] Mr Weichelt died on 20 November 1992.   It is common cause that
Mrs Weichelt took over the administration and control of Cat Quip.

[11] The bank account of Cat Quip was frozen.   The Respondent=s bills were

returned unpaid.   The full amount owing to it became due and payable, and the
bond became executable.   The Respondent became entitled,  in terms of clause
7.1.2 of the bond, to take possession of all Cat Quip=s movable assets for the
purpose of perfecting its security.   Nevertheless, the Respondent did not avail
itself of these rights as it was entitled to do from 18 November 1992 to 26 January
1993 - a factor to which I will refer again.   Nor did Mr or Mrs Weichelt, between
18 November 1992 and 26 January 1993 approach the Respondent to offer or
request it to exercise its rights in terms of paragraph 7 of the bond- a significant
fact, as I will show shortly.

[12] Rivkind obtained possession of all Cat Quip=s movable assets on 26
January 1993 when Mrs Weichelt handed him the two sets of keys of the
premises.   He physically locked up and, together with Mrs Weichelt, left the
premises.

[13]   The Respondent=s case is that, in taking possession of Cat Quip=s
movables on 26 January 1993, as it was entitled to do, it became a lawful
pledgee and, therefore, a secured creditor.   The Appellants, on the other hand,
averring that a disposition of its assets by Cat Quip took place on 26 January
1993, aver that such disposition amounts to a voidable preference in terms of
section 29 of the Insolvency Act.

[14] Section 29 (1) of the Insolvency Act provides :

AVoidable preferences - (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  in the
ordinary course of business and that it was not intended

thereby to prefer one creditor above another.@
(My underlining)

[15] In order to have a disposition set aside the Appellants must prove five
requirements being :
15.1 a disposition as defined in section in section 2 of the Act of its
property by Cat Quip;
15.2 within six months of the liquidation of Cat Quip;
15.3 to the Respondent;
15 4 which has had the effect of preferring one of Cat Quip=s
creditors above another; and
15.5 that immediately after the making of the disposition Cat Quip=s
liabilities exceeded the value of its assets.
Once  the Appellants have established these requirements the Court may
set aside the disposition unless the Respondent proves that :
(a)
the disposition was made in the ordinary course

of business;  and
(b)
it was not intended thereby to prefer one creditor
above another.
If the Respondent should fail to prove either of these two requirements it
must fail.

[16] A dispute arose between counsel for the respective parties at the hearing
of this appeal in respect of the disposition requirement.   Appellants= counsel
argued that the physical delivery of the business and all the movable assets by
Mrs Weichelt to Rivkind on 26 January 1993 was the relevant disposition under
attack.   Respondent=s counsel submitted that the relevant disposition took place
when the material bond was registered on 4 April 1990.   If the Appellants are
right, the disposition [on 26 January 1993] falls within the six months= period of
section 29 (1); if not, the disposition falls outside that period and cannot be set
aside.

[17] Section 2 of the Insolvency Act has this to say of Adisposition@ :
A>Disposition= means any transfer or abandonment of rights
to property and includes a sale, lease, mortgage, pledge,
delivery, payment, release, compromise, donation or any
other contract therefor, but does not include a disposition in
compliance with an order of the court, and >dispose= has a
corresponding meaning.@

[18] The statutory definition of >disposition=, is inept in the extreme.
>Disposition= is a core concept in our law of insolvency, and one would have
expected clarity and certainty in this respect.   What we find, however, is obscurity
and confused thinking.  The definition lumps together a range of dissimilar juristic
facts.   Even more, it allows duplication and overlapping of concepts.   Take the
case of sale.   Ordinarily, if one speaks of a sale, it means the contract of sale,
creating personal rights to claim performance.   But the section also includes >any
other contract therefor=.   What can this mean in the context of sale?   Does it

include an option?   A right of first refusal?   Even more, >delivery= is put on the
same footing as >sale=.   Does this mean that the entering into a contract of sale is
a disposition, and also the later delivery of the thing sold?   And how does one
reconcile a >sale=, creating mere personal rights with the idea, informing the whole
definition, of Aany transfer ...of rights to property@?   After all, in our law a mere
contract of sale does not transfer rights to property - the key requirement is and
remains delivery.
[19] The definition of Adisposition@ in the Insolvency Act has, not surprisingly,
troubled the courts before (see Estate Jager v Whittaker and Another 1944 AD
246 at 250;  Barclays National Bank Ltd v Umbogintwini Land and
Investment Co (Pty) Ltd (in liquidation) and Another 1985 (4) SA 401 (D & C);
Klerck NO v Kaye 1989 (3) SA 656 (C) at 674 C - J).

[20] In the present case the position is that the relevant disposition took place
on 26 January 1993, when Cat Quip delivered its assets to the Respondent in

order to perfect its security.   It is clear that before that date there had not been
Aany transfer or abandonment of rights to property@ (see the dominant part of
section 2 of the Insolvency Act) and that such transfer or abandonment took place
on 26 January 1993 - well within the statutory six months= time limit.

[21] In passing, I would recommend the SA Law Commission to consider
amending section 2 of the Insolvency Act in the course of the Commission=s
present review of the Insolvency Act in the light of the problems alluded to above.

[22] In connection with the requirement of Adisposition@ in the present matter,
a further issue must be addressed.   It is this :  Both parties are agreed that
possession of the movable assets of Cat Quip was given to the Respondent on
26 January 1993 when the keys of the business were handed over by Mrs
Weichelt to Mr Rivkind.   However, on 20 January 1993, at a meeting of the Board
of Directors of the Respondent, a resolution was passed to approach the

Supreme Court on an urgent basis for an order authorising the Respondent
(through the Sheriff or his deputy) to perfect its security in terms of the notarial
bond, by taking and then retaining possession by way of pledge all the movable
assets of Cat Quip.   The necessary papers were prepared and the application
was enrolled for hearing on 26 January 1993.   Prior to the hearing of the matter,
Mrs Weichelt requested a postponement in order to endeavour to raise money.
The Respondent agreed to the postponement, but on 26 January it took
possession of the assets as mentioned above because it then became clear that
a liquidation application was being prepared.   Nevertheless, the Respondent
considered that it was prudent to obtain the order of court sought in the aforesaid
application and, without disclosing the fact that it had already obtained
possession of the assets and thereby having perfected its security, the matter
was enrolled for hearing on 27 January 1993.   The order was granted on that
day.   It is relevant to note that notice of the application was not given to any other
creditor of Cat Quip.   On the same day, 27 January 1993, a provisional

liquidation order was granted by the Supreme Court.

[23] The issue that arises relates to the effect of the order of court dated 27
January 1993 allowing the Respondent to perfect its security by taking
possession of the movables of Cat Quip.   This question becomes relevant,
because section 2 of the Insolvency Act excludes from the definition of
Adisposition@, A ... a disposition in compliance with an order of the court.@   On
behalf of the Respondent it was argued that the disposition now under discussion
does not fall to be set aside because it was a disposition in compliance with an
order of the court.

[24] The Respondent=s argument on this point cannot be upheld.   The
possession was not obtained in compliance with an order of court.   It was
correctly stated by Flemming J in SAPDC (Trading) Ltd v Immelman 1989 (3)
SA 506 (W) at 509 G - H that delivery which precedes the Court order cannot be

a disposition Ain compliance with an order of the Court@.

[25] All the other requirements in respect of which the Appellants bear the
onus of proof, have been fulfilled :
25.1 the liquidation application was presented on 27 January 1993,
i.e. one day after the disposition and the disposition was thus
within 6 months of the liquidation of Cat Quip;
25.2 the disposition was to the Respondent;
25.3 the disposition had the effect of preferring one of Cat Quip=s
creditors (the Respondent) above another;
25.4 immediately after the making of the disposition Cat Quip=s
liabilities exceeded the value of its assets.
The Appellants have accordingly satisfied the aforesaid five requirements
set out above and what remains are the two issues, defined above, which the
Respondent is required to prove on a balance of probabilities.

[26] For the purpose of this judgment I will assume in favour of the
Respondent, without deciding, that the disposition in question was made in the
ordinary course of business.   The vital question is whether the Respondent has
proved on a balance of probabilities that when the disposition - the handing over
of the assets of Cat Quip on 26 January 1993 - was made, it was not intended by
Cat Quip to prefer one creditor above another.
[27] The question whether Cat Quip, in making the disposition now under
discussion, intended to prefer the Respondent above other creditors, is a factual
one.   But that question must be approached against an existing cultural and legal
background.   Only because there seems to be a difference between the
approach of the majority judgment in this case and my own, I  summarise my
view of the law as follows:

[28] Section 29 (1) of the Insolvency Act reflects a particular economic

and legal morality, which may well differ from that of other countries, and which
was expressed in unmistakable terms in R v Ismail 1920 AD 316.   That case
dealt with an appeal against a conviction of a contravention of the provisions of
section 139 (3) of the Insolvency Act of 1916, which provided that every person
shall be guilty of an offence Awho knowingly gives an undue preference.@   Section
28 defined an Aundue preference@ as being Aany disposition of his property made
by an insolvent at a time when his liabilities exceeded his assets with the intention
of preferring one creditor above another.@   It can be seen that these principles of
have been retained in the present Insolvency Act.

[29] In R v Ismail, supra, the basic principle was laid down that once a person
has made up his mind to surrender his estate (or if at the time he contemplated
the sequestration of his estate) A ... his duty was not to make any payments to
one or more of his creditors, but to preserve his assets for the purpose of their
being equally distributed amongst all his creditors.@  (per Solomon JA at 319,

323).   It was also laid down that a creditor with a bill in his favour is in no better
position on the eve of insolvency than any other creditor (see Solomon JA at
324).   Finally it was stated that in the absence of an explanation proving that
such a payment was in the ordinary course of business and with no intention to
prefer, A ... the natural inference to draw from such a payment is that it was made
with intent to prefer.@  (see Solomon JA at 324).

[30] In giving effect to the decision of this Court in R v Ismail, supra, there has
developed a clearly defined point of departure in cases such as the present one:
When once it is proved that the debtor made a payment to one creditor at a time
when he knew that sequestration was substantially inevitable, there arises a
presumption, rebuttable by proof on a balance of probabilities, that the debtor
did intend to prefer that creditor above another or all the others.   (See section 29
(1) of the Insolvency Act;  Gert de Jager Edms) Bpk v Jones NO and McHardy
NO 1964 (3) SA 325 (A) at 331 C;    Pretorius NO v Stock Owners= Co-

operative Co Ltd 1959 (4) SA 462 (A) per Ramsbottom JA at 476 F - G;
Pretorius=s Trustee v Van Blommenstein 1949 (1) SA 267 (0) at 278;  Eliasov
v Arenel (Pvt) Ltd 1979 (3) SA 415 (R) at 418).   In the light of these cases our
law and insolvency practice have developed a clear and consistent approach :
unless duress or other extraordinary factors compelled the debtor to pay one
creditor in preference to others within six months of liquidation or sequestration
and at a time the debtor is aware of impending and unavoidable insolvency
proceedings, a disposition made in these circumstances is liable to be set aside
in terms of section 29 (1) of the Insolvency Act.   There simply is no authority for
the proposition, which seems to me irreconcilable with section 29 (1) of the Act,
that the mere obligation to pay a creditor, is a justification for escaping the
sanction of section 29 (1).   Any endeavour to distinguish R v Ismail, supra, or to
argue that the decision in that case is not applicable to the present appeal is, in
my view, doomed to failure.   Ismail lays down a basic approach to all instances
where the question of intention to prefer became relevant.   And Ismail does not

stand alone.   Its approach and principle are embodied in sec 29 (1) of the
Insolvency Act and the decisions referred to above, inter alia the decision of this
Court in Pretorius NO v Stock Owner=s Co-operative Co Ltd, supra.   When I
refer to R v Ismail I incorporate by reference the time-honoured approach to the
matter of intention to prefer.   What the Respondent has to convince us of in the
present case is either that that approach is wrong or should not be followed in the
present case.   The Respondent has manifestly not succeeded in doing so.

[31] It is trite law that when considering whether a disposition was made with
or without the intention to prefer, the state of mind of the debtor, i.e. Cat Quip
represented by Mrs Weichelt in this case, is relevant and not the intention of the
creditor, the Respondent in this case.   Furthermore, the test is a subjective one.
In this respect - as in all other cases where intention is the subject of enquiry -
inferences, deduction and commonsense play a decisive role alongside
credibility.   In the end, the onus of proof may be decisive.  At the trial of the

present action, the Respondent did not call Mrs Weichelt (now Mrs Fourie) as
witness.   It is common cause that she was available to testify and did testify at
the commission of enquiry held in respect of the affairs of Cat Quip on 27
September 1994.   In the absence of the direct evidence of Mrs Weichelt, the
Respondent, who bears the relevant onus, is faced with a formidable task.   There
was no agreement between the parties that the evidence led at the commission
was admissible.   Consequently it cannot be taken into consideration.
[32] At the trial, Respondent only presented the evidence of the aforesaid
Rivkind.     His evidence amounts to the following  :
32.1 During middle January 1993 he had a conversation with
attorney Wustrow, an executor in the estate of the late Mr
Weichelt.  Wustrow said that Mr Weichelt=s estate was
insolvent, that Mrs Weichelt was running the business but was
incapable of doing so, that A...  he believed that Cat Quip may
be insolvent ... A, that he had recently become aware of the

Respondent=s involvement in Cat Quip by way of a notarial
bond and that the Respondent should protect themselves.
32.2 Mr Rivkind was, however, not alarmed but Mr Wustrow
telephoned him a few hours later to say that certain A ... HP
creditors ... A had moved onto the premises and had begun to
remove equipment.  At that stage Rivkind became alarmed.
32.3 It was then decided that the Respondent would perfect its
security by way of a court order and attorneys were
instructed.   On 21 January 1993 Rivkind deposed to an
affidavit in support of an application in the Supreme Court,
Witwatersrand Local Division, set down for hearing on 26
January 1993.
32.4 The application was not heard on 26 January 1993 because
Mrs Weichelt had contacted the Respondent=s
attorneys to say that ATimquin@ Properties (a separate

company over which the Respondent held security)
was being sold,  the sale should be finalised  A ... within
a day or two ... A  and that the Respondent would be
settled out of the proceeds of the sale.
32.5 Whilst the matter was standing down for a day or two Rivkind
received a telephone call from an attorney Van Rensburg on
26 January 1993 intimating that there was going to be an
application for the liquidation of Cat Quip.   Van Rensburg
was A ... looking for a requisition from us so he could be
appointed as liquidator in the matter if Cat Quip went into
liquidation@.   Van Rensburg said that he believed an urgent
application would be launched the following morning on 27
January 1993 and that it would be brought by Mr Tom
Weichelt, the brother of the deceased.
32.6 Rivkind then realised that the matter was becoming urgent

and that the Respondent needed to take care of its security.
He telephoned Mrs Weichelt and told her that he was coming
out to Cat Quip=s premises immediately and that the purpose
of going there was to take possession of the assets for the
purposes of perfecting Respondent=s security.
32.7 At the premises he discussed the proposed liquidation with
Mrs Weichelt.  She was aware of it.   She was also aware that
the application was being brought by the deceased=s brother
and that he claimed to be owed R11 000.
32.8 Mrs Weichelt :

A ... actually disputed that the amount was
owed [to the deceased=s brother] and [said]
that he in fact owed Cat Quip money and she
did not believe it was a legitimate application.@

32.9 A discussion then took place and :
A ... she went on to say that we hold a notarial

bond, in terms of the notarial bond the stock
is ours and she was handing over the keys for
us to take control, to take possession to
perfect our security.   After that I emphasised
to her that it was actually a term of the bond
that we were entitled to take possession,
physical possession by taking the keys and
being in control of the premises.@

32.10 Rivkind was given two sets of keys by Mrs Weichelt. He
physically locked up and he, together with Mrs Weichelt and
others, left the premises.
32.11 Mrs Weichelt was the first to say (in their discussion on 26
January 1993) that the Respondent had a notarial bond, that
the stock was the Respondent=s and then she A ... virtually
spontaneously ... A and without any pressure at all handed
over the keys to Rivkind.
(My emphasis)
32.12 The intention with regard to taking possession was to put the

Respondent in a better position than they would have been if
they had no pledge and it followed that other creditors would
be worse off, although no thought was given by the
Respondent as to how other creditors would be affected.
This was Rivkind=s uncontroverted evidence.
32.13 He did not discuss the assets and liabilities of Cat Quip with
Mrs Weichelt, but both knew that there was a liquidation
application coming.
32.14 Neither he nor Mrs Weichelt suggested that the liquidation be
opposed, that Cat Quip was not insolvent, nor that there was
thus no need to liquidate Cat Quip.
32.15 Rivkind=s evidence was that he did not suggest that the
liquidation be opposed.   The following exchange then took
place between Mr Rivkind and Counsel for the Appellants :
ANor did she.   I put it to you, whether it was
said in so many words or not, that it was clear

in the context of what had happened and
what you were discussing with this woman
Mrs Weichelt, that both of you realised that
Cat QuipCC is about to be liquidated as being
unable to pay its debt, correct? ...... Yes.@

(It may be interposed that the liquidation application
was presented the next day and a winding-up order
was subsequently granted.)

[33] Even if no weight is given to what Mrs Weichelt allegedly told Mr Rivkind,
it is clear that she knew very well that Cat Quip was insolvent, that a liquidation
application was imminent, that hire-purchase creditors had begun to remove their
equipment and that the game was up.

[34] The only witness called by the Respondent, Mr Rivkind, made the
important concession that both he and Mrs Weichelt realised that Cat Quip was
insolvent because it was unable to pay its debt.   The Respondent did not call Mrs

Weichelt to rebut what its only witness had said.   Having regard to the parlous
state of Cat Quip=s affairs it was, in my view, correctly submitted that what Rivkind
testified in this regard is clearly, on the probabilities, the correct position and Mrs
Weichelt could hardly have said otherwise.
[35] That Mrs Weichelt must have appreciated the extent of Cat Quip=s
financial predicament is demonstrated by her conduct regarding the liquidation
application.   When the Respondent launched its application to perfect its
security, to be heard on 26 January 1993, Mrs Weichelt responded by trying to
settle the Respondent=s claim by the sale of other assets.   Very shortly thereafter
it became known, obviously to her too, that a liquidation application was to be
brought.   Although she is said to have held the view that the claim was invalid
and disputed, she did not resist the liquidation application but her attitude towards
the Respondent changed dramatically  -  instead of offering to pay their claim with
proceeds from other assets, she now voluntarily offered possession of the stock.
As between her and the Respondent, however, nothing had changed legally.  All

that had happened, apparently, was the knowledge of the pending liquidation.
This demonstrates that although she may have said that her brother-in-law=s
claim is disputed, the truth of the matter is that she knew that Cat Quip was
insolvent.   Her intention in offering the key is presumed to be due to an intention
to prefer, and, in the absence of her being called by the Respondent, and
testifying convincingly to the contrary, that presumption must be accepted as the
truth.

[36] Thus if all the evidence introduced by Rivkind on behalf of the
Respondent and reflected above, is given credence, it does not avail
Respondent.   On the contrary, it confirms the assumption that Mrs Weichelt, on
behalf of Cat Quip, intended to prefer the Respondent before the other creditors.
It was she who drew Rivkind=s attention to the notarial bond and that it gave the
Respondent the right to take possession of the movable assets.   She handed
Rivkind the keys voluntarily.   In the absence of any other evidence, the

conclusion that she, on behalf of Cat Quip, intended to prefer the Respondent
above other creditors seems the only natural and probable one.

[37] On the evidence Mrs Weichelt, raised the matter of Respondent=s rights
under the notarial bond (one day before the Respondent was put into provisional
liquidation) without any pressure from Rivkind and freely and from her own
initiative handed the keys of the business to Rivkind, may well be the final nail in
the Respondent=s coffin.   It was never explained why she on that day just
before the provisional liquidation (at least two month=s after Cat Quip had
defaulted in which time nothing had been done) suddenly decided  to hand over
possession to the bondholder.   She well knew, as appears from the evidence of
Rivkind, that the effect of this handover would be that the Respondent would
become a secured creditor and thus be preferred above other concurrent
creditors.   In the absence of evidence offering any other explanation or inference,
it must follow that Mrs Weichelt had the intention to prefer the Respondent above

other creditors.

[38] Even if it can be said that the existence of the bond was uppermost in her
mind, (which was never proved and is the very fact in contention) it does not
follow that it rendered an intention to prefer Awholly inactive@.    On the contrary,
the said knowledge coupled with the proved realization of the consequences of
her act, prove the very opposite, as will appear from the principles discussed in
the cases previously mentioned and the natural and plausible inference from her
knowledge and her decision to proceed with the disposition.

[39] The fact that Mrs Weichelt and Rivkind never discussed what the effect of
handing over the keys would be upon the other creditors of Cat Quip is not a
factor in favour of the Respondent.   On the contrary, it appears from the
evidence that such a discussion was unnecessary, because both knew full well

what the consequences would be.   Why else, at this late stage, the handing over
of the keys?   I have quoted Rivkind=s evidence verbatim in paragraph 32.9
above, and have also referred in paragraph 32.1 above to what the attorney
Wustrow said to Rivkind.   The intention to prefer  the Respondent above other
creditors is manifest.
[40] It is a fundamental mistake in approach to suggest that the intention on the
part of Mrs Weichelt to comply with a contractual obligation, assists the
Respondent to any extent.   The prohibition of section 29 (1) of the Insolvency Act
is aimed precisely at a debtor who, on the eve of sequestration or liquidation,
pays its lawful debt to one creditor.   The debtor cannot do that, as appears from
the judgment in R v Ismail, discussed above.   In fact, if compliance by the
Respondent of its obligations under the bond was a good excuse, so would be all
payments of debts on the eve of liquidation and sequestration, and section 29 (1)
of the Insolvency Act would become a dead letter.   To say that such a debtor
does not have an intention to prefer because he or she was obliged to pay the

debt is an obvious petitio principii (see R v Ismail, supra).

[41] Nobody has ever argued that the bond was not a genuine one or that
liquidation of Cat Quip was pending or even contemplated when it was registered
in 1990.   What is relevant is the intention of the debtor, as represented by Mrs
Weichelt, on the moment of the relevant disposition which occurred on the eve of
the liquidation.   Nor was it ever disputed that Mrs Weichelt and Rivkind
conducted themselves at arms= length.    But this factor also does not avail the
Respondent.   Even in an arm=s length transaction, a disposition can still be
accompanied by an intention to prefer the debtor.   The test is not one of
presence or absence of friendship, but of an intention to prefer.
[42] Then it was argued that the Apressure which was present to Mrs Weichelt=s
mind@ was that Cat Quip had no defence to the Respondent=s claims under the
bond, and that it would not have been competent in law for Mrs Weichelt to have
told Rivkind that she was not prepared to hand over the keys.

As indicated earlier, this approach is fundamentally flawed and is
irreconcilable with the judgments on this point since R v Ismail.   In the latter
case it was expressly stated that it does not avail a debtor, in the face of an attack
under section 29 (1), to say that it was obliged to honour its obligations under a
bill of exchange.   There is no difference between that case and the present one
as far as the legal principle to be applied is concerned.
[43] Then there is the submission that the Respondent would have been
entitled, had Mrs Weichelt refused to hand over the keys, to approach a court and
seek an appropriate order.   It is not self-evident, however, that such an
application would or could have been successful.   Had Cat Quip relied on its duty
to all creditors, as stated in R v Ismail, supra, I cannot envisage any court coming
to the assistance of the Respondent.   One of the cases cited in this regard  -
Pietersburg Cold Storage Ltd v Cacaburas 1925 TPD 295 - does not deal with
the situation where such an order is sought on the eve of liquidation, and does
not advance the Respondent=s case at all.   The other case cited in support of the

Respondent=s case is International Shipping Co (Pty) Ltd v Affinity (pty) Ltd
and Another 1983 (1) SA 79 (C).   In that case there was a notarial bond in
favour of International Shipping Ltd granted by Affinity Ltd over all its movables,
with a clause in similar terms to clause 7 of the bond now under discussion.
When Affinity Ltd ran into financial difficulties, International Shipping claimed to
take possession of all the movable assets of Affinity in terms of the bond.
Affinity refused to give such possession.   Thereafter International Shipping
applied to the Cape Supreme Court for an order authorising it to take possession
of the said movables and to exercise its rights in terms of the notarial bond.
Anglo African Factors (Pty) Ltd (AFactors@), another creditor of Affinity, intervened
in and opposed this application, at the same time making an application for the
winding-up of Affinity.   On the return day, the court (per Grosskopf J) dismissed
International Shipping=s application, because the handing over of the assets
would come after the making of a final winding-up order.   The judge held as
follows:

AOn the papers before me the applicant=s conduct prior to
the commencement of Affinity=s winding-up does not give it
any equitable claim to be placed in a better position than
other creditors, such as for instance Affinity=s employees.
The applicant took a business risk which failed and, like
other creditors, must now be satisfied with its share of
Affinity=s assets as determined by law.  And, as is also laid
down by law, the provisional liquidators should in my view
be enabled to administer Affinity=s estate.   No sound
reason has, in my view, been shown to allow the applicant
in effect to take it over.@

This decision which is in line with R v Ismail, supra, is clearly correct and
puts paid to the Respondent=s case.   If, in the present case, Mrs Weichelt did
what she should have done in terms of R v Ismail, the disposition could only
have been effected after the winding-up order.   It stands to reason that the
Respondent cannot be in any better position if the disposition was effected one
day before the commencement of the winding-up.

[44] Reference was also made to a passage in the cross-examination of Rivkind

in which it was suggested that there was no final handing over of possession, but
only a temporary one, pending the liquidation in order to preserve the liquidation.
Rivkind denied that that was the case.   No inference can be drawn from the
question - it may well have been a well-thought out piece
of cross-examination.   What is important is Rivkind=s denial.   What remains then,
as the only feasible explanation for the handing over of the keys, is an intention of
Mrs Weichelt to give possession of the movables to the Respondent on a
permanent basis.   What other intention could there then have been but to prefer
the Respondent above other creditors?   And what evidence is there of any other
intention?

[45] The most plausible and acceptable reason for the disposition was therefore
the intention to protect and safeguard the Respondent, before other creditors
could remove the movables or bring an application for winding-up, from which

moment Cat Quip could no longer protect the Respondent against the other
creditors due to the resultant concursus creditorum.

[46] I fail to find in the evidence any other Acompelling reason@ for the
disposition, other than the alleged wish of Mrs Weichelt to comply with the
obligations of Cat Quip.   As stated before, and in the light of R v Ismail and the
insolvency cases thereafter, the intention to comply with a valid obligation does
not negate an intention to prefer if the disposition occurs on the eve of a
liquidation and when the debtor knows that it is insolvent.

[47] Further, one can with justification ask the question why, if Cat Quip (or Mrs
Weichelt) considered as Acompelling@ the giving of possession of the movables in
order to comply with the obligations of Cat Quip towards the Respondent, was it
not given in the two months preceding 26 January 1993?   By the end of
November 1992 Cat Quip had defaulted in the payment of the bills in favour of the

Respondent; its financial position was then in a parlous state; it knew of the bond
and its provisions.   Why suddenly, when she became aware of the pending
liquidation application, did Mrs Weichelt take the initiative to hand over the assets
to the Respondent?   The only plausible explanation is that she had the intention
to protect the Respondent against other creditors.
[48] There is also the matter of Mrs Weichelt not testifying.   She was avilable
as a witness.   The onus rested on Cat Quip, as represented by her.   She could
have told the court with what intention she gave possession of the assets to the
Respondent.   This she did not do.   In these circumstances it is proper to draw
the inference that the Respondent, who would have relied on her evidence,
feared that her  evidence will expose facts unfavourable to him, especially under
cross-examination (see Elgin Fireclays Limited v Webb, 1947 (4) SA 744 (A) at
749 in fine).

[49] It was further submitted that Mrs Weichelt had at first asked the

Respondent not to proceed with its envisaged application to court for an order to
be allowed to take possession of the movables, and promised to settle the
Respondent=s claim from the proceeds of the sale of Timquin Properties, another
company over which the Respondent held security.   This sale never materialised.
After that, Mrs Weichelt gave the possession of the Cat Quip movables to the
Respondent.   It was said that this proves that Mrs Weichelt  merely had the
Ainnocent@ intention of complying with Cat Quip=s obligations to the Respondent.
But the correct inference from these facts is exactly the opposite : when Mrs
Weichelt realised that she could not pay the Respondent what was owing to it,
and well-knowing that Cat Quip was insolvent (this appears clearly from the
accounts filed and Mrs Weichelt was, after all, the bookkeeper and manager of
Cat Quip) she handed over the assets of Cat Quip to the Respondent.   She must
have realised that she was preferring the Respondent above other creditors.
The facts do not point to an Ainnocent@ explanation, but to the opposite.   In any
event, there was as far as the said intention is concerned, no onus on the

Appellants.   No other intention was proved on behalf of the Respondent except
the so-called compelling reason to pay its debt to the Respondent - a reason
which, as I have pointed out, is no justification under the circumstances.

[50] And, finally, to say that Mrs Weichelt knew that she had no basis for
denying Rivkind what he was there for, i.e. to take possession of Cat Quip=s stock
by virtue of the bond, is, as indicated above, no excuse, in the light of R v Ismail,
cum suis.   She knew very well that in giving possession to the Respondent, she
was preferring the latter above other  creditors and, well-knowing of the
impending application for liquidation, proceeded with the disposition.   What other
intention, but to prefer the Respondent above others, can be inferred?

In my view, the appeal must succeed with costs.

PJJ OLIVIER   JA

CONCURRING
FARLAM   AJA

MPATI AJA
[1] I have had the advantage of reading the judgments of my brothers Olivier
and Zulman JJA.  I concur in the judgment of Zulman JA.  I merely wish to
mention, however, certain facts which weighed with me and perhaps not with him.
[2] Mr Rivkind=s undisputed evidence is that when he discovered, through one
Van Rensburg on 26 January 1993, that an application for the liquidation of Cat
Quip was imminent, he telephoned Mrs Weichelt and informed her that he was
going to Cat Quip=s premises Aimmediately and the purpose of going there was to
take possession of the assets@, i.e. Ato perfect our security@.  Thus, even though, as

Zulman JA points out, Mrs Weichelt was the first to raise the question of the
existence of the bond during the discussions which she had with Mr Rivkind
immediately prior to handing over the keys, she knew that the purpose of his visit
was to take possession of Cat Quip=s movable assets as he was entitled to do in
terms of the bond.
[3] Coupled with this is the fact that a few days earlier Mrs Weichelt had
persuaded the respondent, through its attorney, not to proceed with its application
for a court order, which was to be sought on 26 January 1993, authorising
respondent to perfect its security.  She had undertaken to the respondent=s attorney
that the respondent=s claim would be settled out of the proceeds of the sale of
Timquin Properties, another company over which the respondent held security.
Whether the sale of Timquin Properties took place or not is not clear from the
record.  The point is, however, Mrs Weichelt did not oppose the respondent=s
application for a court order to perfect its security as there existed no grounds on

which she could do so.  Similarly, she could not have had legitimate grounds to
object to the taking of possession of Cat Quip=s movable assets by Mr Rivkind on
26 January 1993.
[4] That Mrs Weichelt was the first to mention the existence of the notarial bond
during the discussion with Mr Rivkind and that the stock was the respondent=s is
true, but she was not doing so in ignorance of the reason for his visit.  She knew he
was there to perfect the respondent=s pledge by taking possession of Cat Quip=s
movable assets.
[5] To my mind, the most plausible inference to be drawn from these facts is
that Mrs Weichelt knew that she had no basis for denying Mr Rivkind what he was
there for, i.e. to take possession of Cat Quip=s stock.  She knew that Cat Quip had
not met its obligations towards the respondent and that for that reason the
respondent was entitled to perfect its security.  (As to the respondent=s entitlement
to perfect its security, cf International Shipping Co (Pty) Ltd  v Affinity (Pty) Ltd

and Another 1983 (1) SA 79 (C), especially at 85 F-H.)  At best for the appellants
Mrs Weichelt acquiesced in the taking, by Mr Rivkind, of Cat Quip=s movable
assets, but did so because there was no ground for objection.  The bond made
provision for such taking.
[6] I agree, therefore, with Zulman JA that in the particular circumstances of this
case the pressure which was present to Mrs Weichelt=s mind was that Cat Quip had
no defence to the right which the respondent was seeking to exercise to take
possession of Cat Quip=s movable assets.

L MPATI AJA
CONCUR:
MADLANGA AJA

MADLANGA AJA:
[1]   I am in full agreement with Zulman JA and Mpati AJA=s judgments.  I have
seen it fit to deal with some of the issues raised by Olivier JA=s judgment.

[2]   In his judgment Olivier JA strongly relies on R v Ismail 1920 AD 316.  In
Ismail=s case the transactions sought to be impugned involved Ismail (the debtor)
and two other persons.  One of them (a juristic person) had been a supplier of
goods to Ismail=s business which had since been taken over by his brother.  The
evidence revealed that Ismail was eager that the supplier should continue
supporting his brother.   From this the court concluded that it might very well be
that Ismail thought that the supplier Awould be more willing to do so if he placed it
under an obligation to himself@ (at 321).   The second person involved in Ismail=s
transactions was a certain Abdullah Adam, his friend (at 322, 324) from whom he
had purchased goods for ,190.  He had given him a bill for that amount.   Without
any demand by these two persons Ismail effected payment to both of them.  In
testimony Abdullah stated that Ahe had not pressed [Ismail] for payment@ (at 322).

[3]   In my view the above brief statement of the facts of the Ismail case amply
demonstrates that the instant case is distinguishable from Ismail.  Ismail, without
any prompting or demand and with absolutely no pressure of whatever nature,
voluntarily paid the supplier, partly made good the bill and, for the balance on it,
handed over some goods to Abdullah Adam.  In the instant case an application to
perfect the security in terms of the notarial general mortgage bond (Athe bond@) was
pending against Cat Quip.  It had been before court only the day before the
disposition was made but was not proceeded with at Mrs Weichelt=s instance - she

was hoping to find a way to settle the respondent=s debt.  On the date of the
disposition Mr Rivkind telephoned Mrs Weichelt and, in so many words, told her
that he was on his way to Cat Quip=s business premises to take possession of its
movable goods so as to perfect the respondent=s security in terms of the bond (for
more detail, see Mpati AJA=s judgment).  The statement of law by Solomon JA on
which Olivier JA strongly relies should be viewed in the context of the facts of the
Ismail case.  Because of the manifest differences in the facts Ismail=s case is of no
assistance.  That statement of the law is to the following effect (at 324):
AA creditor with a bill in his favour is in no better position on the eve of
insolvency than any other creditor.  There may no doubt be circumstances
which might satisfy a Court that a payment made to such a creditor was one
in the ordinary course of business, and with no intention to prefer; but in the
absence of explanation the natural inference to draw from such a payment is
that it was made with intent to prefer.  In the present case we find that
without any pressure from Abdullah his debt was discharged in full by part
payment of ,45, by return of the goods which he had bought in July to the
value of ,129, and by delivery of further goods to the value of ,20.@

The legal proposition by Solomon JA plainly states that, depending on the
circumstances, a disposition, on the eve of insolvency, made by a debtor who is
aware of the looming insolvency may still be found by the court not to have been
made with an intention to prefer one creditor above another.  On the facts of the
instant case as set out by Zulman JA and Mpati AJA the circumstances are such as
to satisfy the court that Cat Quip (through Mrs Weichelt) did not intend to prefer
the respondent above other creditors.

[4]   A thread that runs through Olivier JA=s judgment is that, at a time when she
was aware of Cat Quip=s parlous financial position, Mrs Weichelt Avirtually
spontaneously and without any pressure at all@ gave up control and possession of
the goods secured by the bond (paragraph 32.11 of his judgment: also see
paragraphs [35], [36], [37] and [47] of his judgment).   Olivier JA relies heavily on
these factors.  I do not agree with his interpretation of the facts.  Earlier in his
judgment Olivier JA himself accepts that Mr Rivkind Atelephoned Mrs Weichelt
and told her that he was coming out to Cat Quip=s premises immediately and that
the purpose of going there was to take possession of the assets for purposes of
perfecting respondent=s security@ (paragraph 32.6).  That being the case, Mrs
Weichelt=s subsequent conduct can hardly be described as Aspontaneous@.  That she
was responding to something initiated by Mr Rivkind is sufficiently demonstrated
by Mpati AJA in his judgment.  Further, in the face of the pending application for
the perfection of the security which had been postponed or stood down only for a
few days and Mr Rivkind=s avowed intention to personally take possession of the
goods it is difficult to understand how it can be said that the disposition was made
when there was no Apressure at all@.  The ratio decidendi in Ismail=s case is, inter
alia, based on the fact that no pressure whatsoever had been brought to bear on the
debtor - he had acted Aspontaneously@.  In casu there was pressure and Mrs

Weichelt did not act spontaneously.  These two factors (which are heavily relied
upon by Olivier JA) must thus be disregarded.  Once that is done, Olivier JA=s
approach, in my respectful view, cannot stand.

[5]   Another case strongly relied upon by Olivier JA is International Shipping Co.
(Pty) Ltd v Affinity (Pty) Ltd and Another 1983 (1) SA 79 (C).  He relies on this
case to counter Zulman JA=s view that Cat Quip had no defence to the respondent=s
insistence on perfecting the security in terms of the bond.  All of this is in the
context of the pressure that was brought to bear on Cat Quip.  In this regard Olivier
JA specifically relies on a passage appearing at 87 C-D of the  report.   In my view
this passage does not support my colleague.  There Grosskopf J was concerned
with the question whether, once an application for the winding-up of a company
has been presented, a creditor who is a mortgagee in terms of a notarial general
covering bond would be entitled as of right to perfect its security in terms of the
bond and thus become a secured creditor.  The passage relied on by Olivier JA is
preceded by passages that plainly demonstrate that the situation dealt with by
Grosskopf J is completely different from the present one (at 84 in fine et seq.)   At
85 F-G Grosskopf J has the following to say:
AThe effect of the filing of the application for liquidation was therefore to
change the nature and purpose of the order of Court which the applicant
sought (and still seeks).  Prior to the filing, the applicant was prima facie
entitled to insist that Affinity should perform its obligations under the bond.
After the filing, Affinity was prima facie unable validly to perform its

obligations if the application was pursued to finality.  In the former event, a
Court order would merely have enforced existing rights.  In the latter event,
a Court order would have created rights and obligations - it would have
rendered valid what would or might otherwise have become void.
Obviously the approach of the Court in granting or refusing an order would
differ completely in the two different sets of circumstances.@

In the International Shipping case the winding-up application was presented before
the application for the perfection of security was heard.  In the passage relied upon
by Olivier JA Grosskopf J is not addressing the question of the existence of a
defence to the application to perfect the security.  He is addressing the question of
the Court=s exercise of a discretion whether or not to come to the rescue of a
mortgagee under a notarial general covering bond where an application for the
liquidation of the debtor company has already been presented.  In casu the
disposition took place before the application for Cat Quip=s liquidation was
presented.  The Court=s approach differs completely in these two sets of
circumstances (Grosskopf J at 85 G).  By way of conclusion on this point I would
say that there is no basis for suggesting that Mrs Weichelt had a defence to the
intended perfection of the security in terms of the bond.
[6]   In my view even assuming that Cat Quip did have a defence, its compliance
with the terms of the bond under the prevailing circumstances would not of
necessity translate to an intention to prefer one creditor above another.  Despite the
existence of such a defence the subjective intention of the debtor may be other than
to prefer one creditor.  I am in full agreement with Zulman JA that on the facts the

plausible inference is that the intention was not to prefer one creditor above
another.  I thus disagree with the suggestion made by Olivier JA in paragraph [49]
(in fine).

[7]   I agree that the appeal must be dismissed with costs.

___________________
MADLANGA AJA

MPATI AJA
)CONCUR