Tuesday, February 20, 2007

By Donna Gewer

Many foreigners who are not domiciled or resident within the jurisdiction of the courts of South Africa (foreign peregrini) are unaware that their local assets may be attached to found or confirm jurisdiction in South Africa. Once the local assets of the peregrinus have been attached, usually after an order has been granted without notice to them, advice is sought on how to dispose of the attachment. Many peregrini are willing to consent to jurisdiction once they become aware of the attachment. That brings me then to the issue in the case of Tsung v Industrial Development Corporation of SA Limited 2006 (4) SA 177 (SCA). The appeal in the Tsung case crisply raised the question of whether an attachment order founding or confirming jurisdiction can be reversed by the consent of a peregrinus defendant after the order has been granted and after the execution of a writ of attachment.

The facts of the case are briefly as follows. The respondents, who are incolae (locally resident), sought and obtained an ex parte order for the attachment of certain movable and immovable properties belonging to the appellants, alleging that they had a claim against the appellants of some R40 million in terms of section 424 of the Companies Act 61 of 1973. The appellants, who are resident in Hong Kong, are foreign peregrini of the Republic and of the Cape High Court. The appellants became aware of the respondent’s intention to attach, and the existence of the order, only after the actual attachment. On the return day, the appellants opposed the finalisation of the order on the ground that, had they known of the intended proceedings they would have consented to jurisdiction. In any event and since the attachment the appellants consented to jurisdiction unconditionally.

Traverso DJP in the court a quo held that the unconditional consent given by the appellants after the order had been obtained was too late and could not undo the attachment. Traverso DJP issued a final order confirming the attachment. Against this the Appellants lodged an appeal with the High Court for leave, which leave was granted.

Harms JA, with Farlam JA, Cameron JA, Jafta JA and Cachalia AJA concurring, held that where an incola plaintiff has a claim sounding in money against a foreign peregrinus defendant and the plaintiff secures and executes an ex parte order against the defendant for an attachment of his assets to found or confirm jurisdiction, the defendant’s subsequent consent to jurisdiction will not reverse the attachment. The plaintiff is therefore under no duty to alert the defendant of his intention to seek an order of attachment and first to invite him to consent to jurisdiction.

As far as general fairness is concerned Harms JA stated that a peregrinus who enters into a consensual relationship with an incola can protect himself at that stage by consenting to jurisdiction or by stipulating that the incola will not be entitled to attach his goods for jurisdictional purposes. This is however generally not possible where the cause of action is not based on contract, but is based in delict. In the latter circumstances Harms JA found that it would not be fair to expect the incola to alert the peregrinus of his intentions and invite him to submit to the local jurisdiction.

From the above it is evident that the Supreme Court of Appeal, per Harms JA, has laid to rest the question whether, in the case where a plaintiff incola attaches a defendant foreign peregrinus’ assets for the purposes of founding or confirming jurisdiction in an action to be instituted for a claim sounding in money, a defendant’s subsequent consent to jurisdiction, after the execution of the attachment, will not undo the attachment. The Supreme Court of Appeal has clearly determined the question in favour of the incola and a foreign peregrinus cannot secure the release of attached assets by a subsequent consent to the jurisdiction of the relevant court.

In addition, Harms JA makes it clear from his judgement that applications for attachment or arrest are as a matter of course brought without notice and the plaintiff has the right to apply for such an order and if the requirements have been met, is entitled to an order. On the return day, the court has to be satisfied that the applicant has a prima facie case; and that, on a balance of probabilities, the applicant is an incola and the respondent is a peregrinus and the property sought to be attached is that of the respondent.

Since a belated consent cannot undo an attachment, what remedies are available to a foreign peregrinus in the circumstances?

Hartzenberg J in Bettencourt v Kom and Another (National Airways Corporation (Pty) Limited Intervening) 1994 (2) SA 513 (T), quoted by Harms in the Tsung Judgement, stated that: "…a late consent cannot undo an attachment, but ….the peregrinus who belatedly consents is not necessarily without redress".

It has long been recognised that the respondent in an application for attachment to found or confirm jurisdiction, can respond to the attachment by applying to set the ex parte order aside.
Hartzenberg J in the Bettencourt case supra (at 517 C – E) was of the view that the correct way to relieve the position of the peregrinus defendant, who consents to jurisdiction after an attachment and who is inequitably extorted by the attachment, even if he has a good defence, is by way of an application, as was done in the case of Banks v Henshaw 1963 (3) SA 464 (D).

Hartzenberg expressed the view that in such an application a court ought to look at the circumstances of the case such as the amount of the claim, the likelihood of the incola plaintiff succeeding, the financial position of the peregrinus defendant, the ease of otherwise of executing a judgement in the country of domicile of the peregrinus defendant, the hardship to the peregrinus defendant if the attachment remains and other similar considerations. The court can then decide if the attachment is to remain unaltered or if it is to be reduced, set aside, or substituted with some other form of attachment or security.

It is evident from the above that a foreign peregrinus has remedies available to it in the case where an order attaching assets to found or confirm jurisdiction has been made ex parte. However to avoid the attachment of its local assets, when contracting with an incola a foreign peregrinus should stipulate either that the incola will not be entitled to attach his goods for jurisdictional purposes or that he consents to jurisdiction.